More RRR cuts seen in 2 years

MANILA, Philippines — The Bangko Sentral ng Pilipinas may lower further the level of deposits banks are required to keep with the BSP by 400 basis points over the next two years, according to British banking giant HSBC.

Fan Cheuk Wan, chief market strategist for Asia at HSBC Private Banking, said the reserve requirement ratio (RRR) may reach 10 percent by the end of 2021.

“We also expect another 200 basis points of RRR cuts each in 2020 and 2021, leaving the RRR at 10 percent by the end of 2021,” Fan said.

Fan said the continued monetary easing from the BSP through the RRR and policy rate cuts would boost private investment and consumer confidence in the coming quarters.

Fan said the Monetary Board is expected to cut interest rates by 50 basis points to 3.50 percent this year from four percent last year despite the expected uptick in inflation to 2.9 percent in 2020 and 2021.

“We forecast headline inflation to remain stable at 2.9 percent in 2020  and 2021 below midpoint of the BSP’s two to

four percent target range. This will leave room for the BSP to cut policy rate further by 25 basis points in the first quarter and another 25 basis points in the second quarter of 2020, lowering the policy rate to 3.50 percent by end-2020,” Fan said.

According to Fan, the central bank easing, healthy private consumption, stable remittances growth and increased government spending would drive the economy this year and next year.

“We forecast GDP growth to accelerate to 6.4 percent in 2020 and 6.5 percent in 2021 from 5.8 percent in 2019,” Fan said.