Business leader commends BSP move on interest rates

CEBU, Philippines —  For an economy that is still hurting, a spike in interest rates will dampen efforts for economic recovery, said the Cebu Chamber of Commerce and Industry (CCCI).

In a statement, CCCI president Felix Taguiam commended the move of the Bangko Sentral Ng Pilipinas (BSP) not to raise interest rates at the moment while the country is working on healing itself from the economic pains of the Covid-19 pandemic.

In the Asia-Pacific, the Bank of Korea and New Zealand have already hiked interest rates, while the Monetary Authority of Singapore tightened monetary policy by raising the slope of its currency band.

The business sector initially feared that similar movement will be implemented in the Philippines.

“The country needs more support mechanisms to communities especially in developing nations such as low bank borrowing rates and relaxation of banking application regulations and accounting rules,” Taguiam said explaining that it would hurt the recovery efforts if BSP were to follow other countries’ move.

Taguiam expressed relief that the BSP has decided to freeze the interest rates hike in the country saying, “the CCCI supports BSP Gov. Benjamin Diokno’s analysis that raising rates too early will cause more harm,” said CCCI president Felix Taguiam, in a statement.

“CCCI underscores that we are still in the period of uncertainty where businesses are striving hard to survive, some are on their way to recovery, while some are still trying to figure out how to navigate this pandemic,” the CCCI president said in a statement.

“Last year, the economic performance of Central Visayas declined by 9.9 percent. It was largely attributed to the onset of the Covid-19 pandemic and there is no guarantee when things will go back to normal and life will be easier again,” Taguiam noted.

Earlier, Diokno was quoted in a report as saying “tightening monetary policy too early may cause more harm to the Philippine economy’s recovery.” 

The Monetary Board has kept its key interest rate at a record low of two percent in its last seven meetings, stressing that raising rates may be premature, considering that the country’s economic recovery is just starting to gain traction.

According to Diokno, some central banks raised their rates because they fear inflation and they see their exchange rate deteriorating so fast as a result, “so some of them have adjusted rates.”