BSP to keep interest rates low until H1 2022

MANILA, Philippines — Monetary authorities may keep an accommodative policy stance until the first half of next year to ensure full recovery from the pandemic-induced recession, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno.

In an interview with ABS-CBN News Channel, Diokno said the BSP is likely to keep “this loose monetary policy until such time that we are sure that government is on its way to recovery, a sustainable recovery.”

“And that I see will happen maybe second half of next year, so that’s when we’ll probably look at further adjustments in our monetary policy,” Diokno said.

The BSP has kept interest rates at record lows for the past six months to help the economy recover after a record 9.6 percent gross domestic product (GDP) contraction last year.

The last time the BSP tweaked interest rates was in November last year when it delivered a surprise 25-basis-point rate cut.

“We’ll have a very carefully crafted, managed disengagement strategy,” the BSP chief said.

Economic managers, through the Development Budget Coordination Committee (DBCC), slashed the GDP growth target to a range of six to seven percent this year and to seven to nine percent next year as the National Capital Region and nearby provinces (NCR Plus) were placed under strict lockdown and quarantine measures from March 29 to May 14.

With the target of inoculating 50 million Filipinos by the end of the year and 70 million by the first quarter of 2022, Diokno said there could be “no hard lockdown down the road.”

“No. I think we have learned our lesson. Unlike other countries that have opened and then locked down, we have done it very methodically,” Diokno said.

Despite the aggressive rate cuts, big banks remained cautious in extending loans amid the heightened risk aversion in the industry with loan disbursements shrinking for the fifth straight month.

Data released by the BSP yesterday showed outstanding loans of universal and commercial banks shrank by five percent in April from 4.5 percent in March.

“Bank lending remained weak as measures to contain the resurgence in COVID-19 cases constrained domestic economic activity and continued to dampen market sentiment,” the BSP said in a statement.

Data released by the BSP showed loans released by big banks amounted to P8.99 trillion in end- April from P9.47 trillion recorded in the same period last year.

Lending for production activities declined further by 3.9 percent, hitting P7.92 trillion from a year-ago level of P8.24 trillion.

Likewise, consumer loans recorded a double-digit decline of 10.2 percent to P824.3 billion in April from P918.18 billion in the same month last year.

Credit card loans shrank by 9.6 percent to P3991.3 billion from P432.9 billion amid the rising default by borrowers affected by the COVID-19 pandemic. The Monetary Board has maintained the 24 percent annual ceiling on credit card charges since Nov. 3 to ease the burden of borrowers.