THE GOVERNMENT should prioritize measures to contain the coronavirus pandemic as it looks towards economic recovery, with the Bangko Sentral ng Pilipinas (BSP) likely done easing policy to stimulate activity, the International Institute of Finance (IIF) said.

“So far, the BSP has done its job and is likely to remain on hold, it may need to add to liquidity especially given large upcoming domestic issuance by the government,” IIF Deputy Chief Economist Elina Ribakova said in an e-mail.

“Compared to regional peers, Philippines and Indonesia still stand out with the second round of lockdowns. At this stage, containing the pandemic is paramount before we can start talking about what macro policies can do to support the recovery,” Ms. Ribakova said.

The BSP has already slashed benchmark interest rates by 175 basis points (bps) this year. At its policy review last month, it decided on a “prudent pause” to allow its previous moves to “fully work their way through the economy.”

The overnight reverse repurchase, lending, and deposit rates are at record lows of 2.25%, 2.75%, and 1.75%, respectively.

The central bank has also slashed reserve requirements by 200 bps to 12% for big banks and by 100 bps for thrift and rural banks to three percent and two percent, respectively.

The BSP is set to make its maiden offer of securities on Friday in an auction of 28-day papers. The final offer volume has yet to be announced.

With the central bank having done its part in terms of monetary policy, Ms. Ribakova said the government must move to arrest the further spread of the virus, with economic activity expected to pick up towards the end of the year.

“With another round of lockdown in August, low remittances, and still low government support, we expect the economy to rebound only modestly towards Q4 2020,” Ms. Ribakova said.

The government expects the economy to contract by 4.5% to 6.6% this year due to the worsening impact of the coronavirus crisis. The economy is now in technical recession after the record 16.5% contraction of gross domestic product in the second quarter.

President Rodrigo R. Duterte on Friday signed the Bayanihan to Recover as One Act or Bayanihan II which allocates P165.5 billion for the government’s pandemic response. This is a followup to the P275-billion Bayanihan I law which realigned items in the national budget for COVID-19 response measures. — L.W.T. Noble