Recto sees 50-to-75-bp full-year BSP rate cut
Finance Secretary Ralph Recto sees “high probability” of an interest rate cut at the April 10 policy meeting of the Bangko Sentral ng Pilipinas (BSP), adopting a more dovish outlook as he hopes for lower borrowing costs to spur growth.
In an interview with Bloomberg TV on Wednesday, Recto, who sits on the seven-member Monetary Board as representative of the Marcos administration, said he expected a total of 50 to 75 basis points (bps) of additional policy rate cuts this year.
That is more dovish than the 50-bp total rate reductions that BSP Governor Eli Remolona Jr. signaled before.
For Recto, trimming the BSP’s overnight borrowing rate—currently at 5.75 percent—by a total of 150 bps in the next two years could help propel economic growth by “at least half a percent.”
“Because inflation has been controlled in the Philippines … there is room for a rate cut in our next meeting,” the finance chief said. “So, we’re in an easing cycle.”
Ultimately, the finance chief said the economy could grow by 6 percent in 2025 “at the very least,” citing the usual boost in economic activities during election years. And despite the simmering political tensions ahead of the May polls, Recto said the situation in the country would remain stable.
Front-loaded
Government data showed gross domestic product (GDP) had expanded at an average rate of 5.6 percent for the entire 2024, a year marked by strong typhoons and massive flooding.
While that pace of expansion was a little faster than the 5.5-percent growth in 2023, the latest reading fell short of the revised 6-to-6.5-percent goal of the Marcos administration, marking the second year of below-target GDP growth.
For this year until the end of President Marcos’ term in 2028, the government is targeting to make the economy grow between 6 percent and 8 percent. But some analysts believe a shallow easing cycle could hold back the economy from posting a stronger growth.
In February, at its first policy meeting for this year, the BSP decided to hit the pause button on easing, citing the need to defend the economy and the inflation outlook against “unusual” uncertainties coming from a slew of tariff actions in the United States.
Meanwhile, a benign inflation that had eased more than expected in February is seen to provide the central bank more room to further cut the cost of money.
As it is, the slow interest rate-cutting cycle at home and abroad already prompted the government to front-load its foreign borrowings early this year. Recall that the state raised $3.25 billion during its sale of US dollar and euro-denominated bonds last January.
“We’ve already front-loaded the foreign exchange that we need,” Recto said. “I think we’ve got it covered already for the year.”
