BSP to keep rates steady; economy remaining in recession: Reuters poll

Reuters

Posted at May 10 2021 03:59 PM

BSP to keep rates steady; economy remaining in recession: Reuters poll 1
The Makati skyline looms behind a slum area in Pasay City on January 28, 2021. Mark Demayo, ABS-CBN News

MANILA - The Bangko Sentral ng Pilipinas is expected to keep its benchmark interest rate at a record low on Thursday, after the economy likely contracted for a fifth straight quarter in the January to March period, a Reuters poll showed.

All 13 economists surveyed predicted the BSP will keep the rate on its overnight reverse repurchase facility at 2 percent for a fourth straight meeting.

The central bank meeting will follow government data on Tuesday that is expected to show gross domestic product (GDP) shrank 3 percent in the first quarter from a year ago, though marking an improvement on the 8.3 percent slump in the preceding quarter.

"We expect the BSP to remain on hold ... with the central bank likely noting the appropriateness of current monetary policy settings as the country battles the ongoing wave of (COVID-19) infections," J.P. Morgan economists said in a note.

A surge in coronavirus cases that began in March has forced the Philippines, already battling one of the worst outbreaks in Asia, to reimpose stricter curbs in the capital and nearby provinces.

The National Capital Region, an urban sprawl of 16 cities home to at least 13 million people, accounts for 40 percent of the country's total economic output.

Some economists expect the BSP to keep rates unchanged for the rest of 2021, despite inflation breaching a 2 to 4 percent target band mainly due to tight pork supplies.

The BSP has vowed to continue supporting the economy, which shrank by a record 9.6 percent last year due to lockdowns. 

While the economy is forecast to bounce back this year, some economists said the rebound may disappoint, with a slow vaccine rollout adding to growth concerns.

Economic growth will probably be closer to 4 percent this year, said Steve Cochrane, chief Asia-Pacific economist at Moody's Analytics, compared with the government's 6.5 to 7.5 percent target.

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