SOME ASIAN central banks, including the Bangko Sentral ng Pilipinas (BSP), will likely remain accommodative in 2021 to provide support to their coronavirus-battered economies, a think tank said.

“Indonesia, the Philippines and Vietnam have all cut rates in recent weeks, and we have further easing pencilled in for these three economies as well as India next year,” Capital Economics said in a report published late Monday.

Meanwhile, it said China may be the only country where rate hikes would be on the table in 2021.

The research firm said the Philippines, Thailand and India are among the region’s worst-hit by the virus as output remains 5-10% smaller than its pre-crisis level.

“Given the big hole that many countries still find themselves in, monetary policy will need to remain loose for some time to come,” it said.

In the Philippines, further easing is likely amid “the weakness of recovery and low level of fiscal support,” said Capital Economics.

The BSP last month unexpectedly cut benchmark rates to new record lows, the fifth reduction this year, citing the continued uncertainty caused by a fresh surge in coronavirus cases globally and the impact of recent typhoons on the struggling economy, with business and household confidence remaining low.

The Monetary Board trimmed the rates on the BSP’s overnight reverse repurchase, lending, and deposit facilities by 25 basis points (bps) to 2%, 2.5%, and 1.5%, respectively.

The latest easing move followed a “prudent pause” by the central bank since its June meeting. The central bank has already cumulatively lowered interest rates by 200 bps this year.

A central bank official last week said the regulator has space to keep an accommodative policy stance if the economy needs a monetary boost.

“For the foreseeable future, while there’s this impact of the pandemic that’s dampening of economic activity, then you can expect that the policy stance will remain accommodative over the near term. There’s a lot of available policy space should there be the need to act,” BSP Deputy Governor Francisco G. Dakila, Jr. said at the BusinessWorld Virtual Economic Forum on Thursday.

Meanwhile, on the fiscal side, government spending was down for the second consecutive month in October by 6.84% year on year to P290 billion from P310.8 billion.

Based on the policy tracker of the International Monetary Fund, fiscal measures implemented so far by the Philippine government are equivalent to 3.9% of the gross domestic product (GDP). This is smaller compared with responses from regional neighbors, including Malaysia at 5% of GDP, Thailand at 9.6%, Vietnam at 4.2% and Indonesia at 4.4%.

The Philippine economy remained in recession in the third quarter as GDP contracted by 11.5%, following the record 16.9% decline in the three months ended June.

This brought the GDP performance for the first nine months to a 10% contraction.

The government expects the economy to shrink by 4.5-6.6% this year. — L.W.T. Noble