BSP: PH poised to hit GDP growth goal for ’24
Economic growth in 2024 could settle around the lower-end of the 6 to 7 percent target band of the Marcos administration, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said, while hoping that the rate cuts would help the economy achieve a stronger expansion in 2025.
“I think we will be close to 6 percent, maybe a bit above it for 2024,” Remolona said in an interview with CNBC on Friday, a day after the BSP kicked off its easing cycle with a 25-basis-point (bp) reduction in the benchmark rate.
The outcome of the recent policy meeting of the Monetary Board brought the BSP’s target reverse repurchase rate to 6.25 percent, unwinding previous tightening actions that had sent the key rate to an over 17-year high of 6.5 percent.
Banks use the BSP’s benchmark rate as a guide when charging interest rates on loans. By bringing down borrowing costs, the BSP wants to stimulate bank lending to boost consumer spending and investments.
But those rate cuts work with a lag, meaning these adjustments would take months to be fully absorbed by the local financial system. That said, Remolona explained that “the relevant policy horizon” is 2025—the year the government is targeting a gross domestic product (GDP) growth of between 6.5 and 7.5 percent.
“So we cut yesterday, we might cut again sometime during the year and then we hope that has a significant effect on growth,” he added.
The latest decision of the BSP took into account the latest government data showing inflation had bolted to 4.4 percent in July, the first time this year that price growth had breached the central bank’s 2 to 4 percent target range. But the central bank said inflation was still projected “to trend downward” despite the flare-up last month.
