MANILA – HSBC is sticking to its forecast that the Bangko Sentral ng Pilipinas (BSP) won't cut interest rates this year even after Thailand and South Korea joined what some call a global "currency war."
HSBC economist Trinh Nguyen said that's in part because the BSP is already one step ahead.
“There is really not a huge urgency for countries such as the Philippines to cut rates significantly because growth is robust, inflation is on track, and the currency is quite comfortable with the current environment...In fact, the BSP is ahead of the curve, it actually cut rates significantly in 2013," Nguyen said.
"The central bank is already doing what it can to support the economy, and it's going to continue to do so by keeping rates at record lows,” she added.
Thailand and South Korea surprised markets with rate cuts.
More than 20 economies have already eased monetary policy this year to boost growth.
The low interest rates are weakening their currencies, making their exports more competitive, and forcing others to follow suit.
HSBC said the Philippine economy will grow 5 to 6 percent the next two years but needs to work on government spending and investments to further boost growth.
“When you look at GDP growth in the Philippines, consumption is sticky, it's not volatile at all. It's between 3 to 6 percent growth and the volatile aspect is actually government spending, it's the investment side, the net export side, these are the volatile aspect. So once you've taken care of these, then its very easy for the Philippines to have 7 percent growth," Nguyen said.
"When people think of coming to the Philippines, they can do with a snap of a finger and that's what competitiveness is about to make it happen not just in the pocket level but systemic level and that's when the 7 percent is maybe even in the lower side we might even talk about 9 percent growth,” she added. -- ANC