Inflation slowing down, BSP likely to cut rates anew by 25 bps: economist


Posted at Feb 02 2021 04:48 PM

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MANILA - The Bangko Sentral will likely its policy rate again by at least 25 basis points (bps) to help the national government's infrastructure program and boost the economy amid the continuing impact of the pandemic, an economist said Tuesday.

The central bank already cut its key rate five times last year, totaling 200 bps, bringing it to a record low of 2 percent.

Vic Abola, an economist at the University of Asia and the Pacific (U&AP), said in an interview with ANC's Market Edge on Tuesday that the rate cut will attract financing of infrastructure projects, giving opportunities to contractors and businesses, eventually creating more jobs.

Abola also downplayed concerns about inflation.

"We have seen the peak of the inflation already. I don't see acceleration this month because of the high pace last year. I think it will slow down and continue to do so."

Abola also urged the government to pass laws that will help businesses, such as the Financial Institutions’ Strategic Transfer (FIST) and the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE).

Congress recently approved the CREATE bill which seeks to attract more foreign investors to the Philippines, pumping in more funding and activities for the local economy.

The key to get the economy moving and to hit the government's 6.5 to 7.5 percent GDP target is to ease all lockdown restrictions, he said.

Easing restrictions will solve issues such as logistics constraints affecting food supply, public transportation, getting "workers and businesses moving" and restoring incomes -- which will keep Filipinos from going beyond the poverty line.

"The government continues to use a shotgun approach. GCQ [general community quarantine] is a shotgun approach. It has impeded the movement of people and goods. Especially you give the powers to the LGU, with different rules and requirements," Abola said.

"We have been obsessed with COVID-19 that we forgot about the people," he added, referring to the country's series of quarantines, the longest lockdown in the world.