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ADB raises P5.22B via peso bonds for PHL projects

THE ASIAN Development Bank (ADB) raised over P5 billion in local currency bonds offered to foreign investors, with the funds meant to support projects in the Philippines.
In a statement, the multilateral lender said its recent bond float yielded P5.22 billion ($100 million) through the issuance of four-year currency-linked debt papers.
These bonds carry a fixed interest rate of 5.25%, and are denominated in the peso but will be settled using US dollars.
“The proceeds of the bonds will support ADB’s growing local currency operations in the Philippines and help to reduce foreign exchange risk for ADB’s borrowers,” the lender said on Friday.
The Manila-based development firm said investors from Asia, Europe and the Americas grabbed hold of the bonds, with global bank JP Morgan serving as sole lead manager.
ADB Treasurer Pierre Van Peteghem added that the multilateral lender has been issuing local currency bonds across ADB member-countries. Prior to this offering, the ADB previously floated bonds in the local capital market in 2005 and 2007.
The ADB raised over $23.5 billion from the capital markets through several bond issuances in 2018. In January, the Japan-led regional lender marked their maiden issuance of domestic bonds in Kazakhstan.
Last week, the ADB also bought $20-million worth of green bonds floated by Ayala Corp.’s AC Energy, Inc., which will support the firm’s renewable energy projects in the Philippines.
Headquartered in Mandaluyong City, the ADB lent $1.38 billion in 2018 to support two policy-based loans on public-private partnerships in infrastructure and financial inclusion, the Mindanao growth corridors roads project, and the emergency loans and grants to support recovery for Marawi City.
This year, ADB is looking to extend $2.5 billion to the Philippines, as part of a $7.14-billion lending program until 2021. Among the projects in the pipeline include the Malolos-Clark railway project, the EDSA Greenways project, Angat water transmission improvement project, the secondary education support project, policy-based loans on local governance, youth employment and capital markets, and a capacity-building project to foster competition, according to the ADB website. — Melissa Luz T. Lopez

Rice stocks climb at start of 2019

THE COUNTRY’S rice stocks totalled 2.55 million metric tons (MT) as of Jan. 1, up by 11.40% from the previous year’s level of 2.29 million MT, the Philippine Statistics Authority (PSA) said on Friday.
PSA’s Rice and Corn Stocks Inventory report showed that rice stocks increased in commercial warehouses but went down in households and warehouses of the National Food Authority (NFA).
Inventories in commercial warehouses increased by 40.59% to 1.21 million MT as of Jan. 1 from 857,280 MT the previous year.
Meanwhile, household stocks decreased by 5.88% to 1.25 million MT as of the start of the year from 1.33 million MT a year ago. NFA stocks also declined to 97,910 MT from 100,860 MT last year.
Household stocks contributed 48.91% to the total inventory of the staple at of Jan. 1, while commercial stocks comprised 47.25% and NFA warehouses, 3.84%.
Meanwhile, the PSA reported that the average farmgate price of palay was logged at P19.73 per kilogram (/kg) in the fourth week of January, down 0.30% from P19.79/kg a week ago.
Average wholesale price of well-milled rice was at P41.50/kg in the fourth week, lower by 0.17%. Average retail price of well-milled rice, on the other hand, was at P45/kg in the fourth week, down 0.27% from the previous week.
On the other hand, the average wholesale price of regular milled rice was at P38.25/kg, declining by 0.21% from the prior week, while average retail price was at P41.16/kg, down 0.60%, according to the PSA.
CORN STOCKS
As for the country’s corn stocks inventory, the total as of Jan. 1 was at 676,130 MT, down 28.95% from 951,600 MT at the start of 2018.
Commercial warehouses’ stocks decreased by 36.03% to 560,520 MT as of Jan. 1 from 876,180 MT the previous year. Household stocks, meanwhile, increased by 54.17% to 115,610 MT from 74,990 MT year-on-year.
Meanwhile, NFA held zero stocks of corn as of Jan. 1.
PSA data showed that the average farmgate price of yellow corngrain fell by 0.57% to P13.90/kg in the fourth week of January from P13.98/kg the previous week. Its average wholesale price, meanwhile, rose 0.05% to P20.31/kg from P20.30/kg.
The average retail price of yellow corngrain also went up 0.28% to P25.18/kg in the fourth week of January from P25.11/kg a week ago.
White corngrain’s average farmgate price, meanwhile, remained at P13.98/kg in the fourth week of January. Its average wholesale price also remained at P20.80/kg, while average retail price was steady at P28.12/kg. — RJNI

Bloomberry to replace Petron in PSE index

THE 30-member Philippine Stock Exchange index (PSEi) will see the addition of Bloomberry Resorts Corp. starting on Feb. 18, after the bourse operator’s full-year review in 2018.
In a statement issued Friday, the Philippine Stock Exchange, Inc. (PSE) said Bloomberry will replace Petron Corp. in the main index.
“The regular review of indices reflects the dynamic changes in company performance vis-a-vis the standards set by the Exchange. In turn, these indices represent the investment opportunities in the Philippine stock market,” PSE President and Chief Executive Officer Ramon S. Monzon said in a statement.
The PSE ranks companies included in the PSEi based on their liquidity and market capitalization. Firms must have a public ownership of at least 15%, and should also be eligible using relevant financial criteria.
The PSE also announced changes in the composition of sectoral indices, with the Mining and Oil index to be the lone counter that will remain unchanged.
Asia United Bank Corp. will be removed from the Financials counter. Alliance Select Foods International, Inc. will join the Industrial index, while PetroEnergy Resources Corp., Phoenix Petroleum Philippines, Inc., and SFA Semicon Philippines Corp. have been dropped.
The Holding Firms index will remove Solid Group, Inc., while the Property index will add Philippine Infradev Holdings, Inc., formerly IRC Properties, Inc.
Chelsea Logistics Holdings Corp. and Transpacific Broadband Group International, Inc. will join the Services index, while Melco Resorts and Entertainment (Philippines) Corp. (MRP) will be removed.
The PSE earlier said that MRP is already de facto delisted from the exchange, since it has made no efforts to increase its public float to the minimum 10% after majority shareholders’ tender offer last year.
The bourse operator conducts an index review twice a year. The next round of recomposition to be announced in August. — Arra B. Francia

DA eyes export of coconut oil, bananas, shrimps to Russia

THE DEPARTMENT of Agriculture (DA) aims to tap the unexplored markets of Russia for possible export of coconut oil, banana and shrimps, Agriculture Secretary Emmanuel F. Piñol said on Friday.
“With three fisheries companies already exporting their products to the Russian Federation, the Philippines is now working on the marketing of more agricultural products to the vast market, including coconut oil, bananas, shrimps and others,” Mr. Piñol said in a Facebook post.
“The DA is now organizing a trade mission which would include stakeholders of the agriculture and fisheries sector of the country to further penetrate the huge and previously unexplored market of Russia and other member countries of the Russian Federation,” he added.
Earlier, Mr. Piñol said a group of businessmen from Russia is interested to grow bananas in Camp Abubakar with an investment amount of P8 billion. The project is expected to employ about 10,000 workers composed of former rebels and their children.
The DA is set to send a delegation to Moscow, Russia in late February to have an agreement signed between Mr. Piñol and Russian Agriculture Minister Dmitry Patrushev to spell out specific areas of engagements between the two countries, which includes the interest of Russian business groups to develop agriculture and aquaculture in the Bangsamoro region.
Mr. Piñol has met with Russian Ambassador to the Philippines Igor Khovaev to finalize the arrangements on the planned visit of the local DA delegation to Russia, which will include farmer organizations from the coconut, banana, mango and fisheries sectors.
“The planning of the trade mission was primarily prompted by the efforts of the DA to find new markets for its coconut products in the face of very low prices of coco oil in the world market,” the official said.
Mr. Piñol added that he expressed to Mr. Khovaev the interest of the Philippines to import fertilizers, wheat and modern farm machinery from Russia and member states of the Russian Federation. — R.J.N. Ignacio

Cemex Philippines swings to loss in 2018

CEMEX Holdings Philippines, Inc. (CHP) suffered a net loss in 2018, pulled down by the impact of the landslide in Cebu and higher foreign exchange losses.
In a disclosure to the stock exchange on Friday, the listed cement manufacturer reported a consolidated net loss of P930 million, versus a net income of P659 million in the same period a year ago.
The company incurred a net loss of P325 million during the fourth quarter, since the firm where CHP mainly obtained its raw materials was affected by the landslide in Naga City, Cebu on Sept. 20.
It then had to source its materials from farther sources, pushing costs higher. The cost of sales accounted for 66% of the company’s sales, against 58% in the same period a year ago.
“The past quarter was a very challenging one following the landslide in Naga City. It tested the strength and resolve of all who were affected. The perseverance of the community was very inspiring even as we worked on restoring our operations to normality,” CHP President and Chief Executive Officer Ignacio Mijares said in a statement.
The company also added that higher income tax expenses recorded in the second quarter, lower operating EBITDA, and higher foreign exchange losses affected its performance for the year.
Despite the net loss, the company managed to increase its net sales by seven percent year-on-year to P23.42 million.
The private sector drove CHP’s business for the year, as residential construction remained strong, supported by the demand from overseas Filipino workers, foreign investors, and outsourcing and offshoring companies.
Meanwhile, infrastructure construction also expanded in 2018 following the 50% increase in the government’s disbursements for infrastructure and capital outlay in the first eleven months of 2018. During this period, the National Economic and Development Authority noted that nine flagship projects have broken ground.
The company remains upbeat for its prospects this year due to the expected robust demand for cement in the country.
“We are excited about the prospects for the company in 2019 and see continued strong cement demand in the country. For this reason, we remain focused on improving our operations and completing our expansion in a timely manner,” Mr. Mijares said.
CHP expects to finish construction of its new cement production line in Antipolo, Rizal by the fourth quarter of 2020. Its subsidiary, Solid Cement Corp., signed in October last year the procurement, construction, and installation agreement with China’s CBMI Construction Co., Ltd. for the facility.
Shares in CHP fell by 4.26% or 11 centavos to close at P2.47 each at the stock exchange on Friday. — Arra B. Francia

More Manila Bay establishments cited for violations

MORE establishments near Manila Bay have been cited for violations of pollution laws, according to authorities.
The Department of Environment and Natural Resources (DENR), through Laguna Lake Development Authority (LLDA), issued cease and desist orders against Makchang Korean Restaurant in Manila; Legend Seafood Restaurant in Pasay; and NetWorld Hotel in Pasay.
The establishments were cited for failing to have proper waste water treatment facilities, as the government continues its efforts to rehabilitate Manila Bay.
Ex-parte orders were also issued against San Andres Public Market in Manila; Malate Royale Development Corp — Malate Crown Plaza Condominium in Manila; Center for International Trade Exposition Center in Pasay; The Metroescapes Corporation — Seascape Village in Pasay; Antel Seaview Towers Condominium in Pasay.
Nine establishments meanwhile were given notice of violations, namely Harbour View Square in Manila; China Oceanis Inc Phils — Manila Ocean Park in Manila; SM Development Corporation Breeze Residences in Pasay; Sofitel Philippine Plaza in Pasay; Philippine International Convention Center in Pasay; Midas Hotel and Casino in Pasay; Carwash by Benjas in Pasay; Sogo Hotel along Roxas Blvd, Pasay; and Harrison Mansion in Pasay.
“Based on the recent saturation activities of LLDA in the Manila Bay area, as well as the results of laboratory analysis of water samples taken, the following establishments were found to be not conforming with the effluent standards for class ‘SB’ waters,” the LLDA said in a statement.
The saturation activities recorded were as of Jan. 24, 2019.
The DENR classifies SB waters into three categories: Fishery Water Class I which means the water is suitable for commercial propagation of shellfish and intended as spawning areas for milkfish (Chanos chanos) and similar species; Tourist Zones which means it is safe for ecotourism and recreational activities; and Recreational Water Class I which means it is intended for primary recreation such as bathing, swimming, skin diving, etc. — Reicelene Joy N. Ignacio

ATI eyes new projects

ASIAN Terminal Inc (ATI) on Friday said it is planning to launch new projects such as off-dock container yards and empty container depots, as it seeks to expand beyond its port operations in Batangas and Manila.
“As a trade enabler, we are eyeing to develop more facilities that will leverage on our existing gateway ports in Manila and Batangas to better serve our valued customers,” ATI Executive Vice President William Khoury said in a statement on Friday.
ATI identified these projects as off-dock container yards, empty container depots and other ancillary facilities.
“These projects will establish greater operational synergies to help the industry cope with current logistics challenges and also create growth opportunities in the long-term,” Mr. Khoury added.
ATI is looking to have additional capacity for empty containers by mid-2019.
Currently, ATI operates Manila South Harbor and Batangas Container Terminal, as well as an Inland Clearance Depot (ICD) in Calamba, Laguna.
ICD is a Customs-bonded facility, and has been a supply chain partner for major manufacturers and industrial zones in Cavite, Laguna and Batangas. — R.J.N.Ignacio

BSP seen keeping rates steady

By Melissa Luz T. Lopez, Senior Reporter
THE CENTRAL BANK has enough room to keep interest rates steady over the next few months, global banks said in separate reports, noting that attention has shifted to market liquidity now that inflation has slowed.
Foreign bank analysts said the Bangko Sentral ng Pilipinas (BSP) can afford to keep policy settings unchanged until later this year following its Thursday decision to stay on hold.
“Overall, we expect the BSP to remain on hold for a while as the economy adjusts to the policy tightening undertaken last year,” economists Mustafa Arif and Khoon Goh of ANZ Research said in a report released late Thursday.
“The recent decline in core inflation suggests that underlying pressures are easing. In our view, this is quite encouraging and provides greater confidence that the central bank will achieve its inflation target in 2019.”
The policy-setting Monetary Board kept voted to keep benchmark rates between the 4.25-5.25% range, marking the second straight meeting and keeping the key rates at the highest level seen in a decade.
The BSP said it kept rates steady amid a “manageable” inflation environment, with solid signs that inflation is indeed on a sustained decline.
Inflation eased further to 4.4% in January, marking the third straight month of decline from a peak of 6.7% in September and October last year, although still above the 2-4% target band.
Inflation remains a supply-driven concern despite the slower rate last month, the Department of Finance said in an economic bulletin on Friday.
“Productivity programs need to be implemented to reverse the price increases of fish, fruits and vegetables,” Finance Undersecretary and chief economist Gil S. Beltran said, noting that supply issues kept the prices of these three commodities higher compared to a year ago.
NO RATE CUTS?
Central bank officials also saw risks to consumer prices are “evenly balanced” for 2019, giving assurance that inflation will return to the 2-4% target band coming from last year’s 5.2% average.
BSP Assistant Governor Francisco G. Dakila, Jr. even said the monthly rate will return to below four percent by March, while the full-year forecast now stands at 3.1% for 2019, down from 3.2% previously.
The outlook is more sanguine for 2020, when inflation is seen to average three percent. The central bank noted that they will stand vigilant and will “take appropriate policy action as necessary” to keep prices in check and the financial system stable.
ANZ took this as a sign that the BSP “will not be looking to unwind some of last year’s hikes even if inflation continues to moderate further.”
In a separate report, HSBC economist Noelan Arbis held on to his view that the BSP will not budge on policy rates and will instead reduce the reserve requirement ratio (RRR) for banks this year.
In 2018, the central bank slashed the mandatory reserves by 200 basis points (bp) in two moves. This left the cash maintained by big banks at 18% of total deposits.
“With inflationary pressures easing, the BSP is signalling that it is shifting its focus toward tightness in domestic liquidity. We see no further rate hikes in 2019 and expect 300bp of RRR cuts this year, with the first 100bp likely in 2Q,” Mr. Arbis said.
BSP Deputy Governor Diwa C. Guinigundo has said further reserve cuts will depend on the year-to-date inflation print as well as inflation expectations being within target, as well as “tight” liquidity conditions that would warrant the release of around P100 billion to the economy for every 100bp reduction.
However, Mr. Guinigundo said that the local financial markets are not tight at this point, dismissing RRR adjustments anytime soon.
“We believe it would be most prudent for the BSP to wait until inflation is firmly within its target before engaging in any monetary accommodation. Based on our current inflation trajectory, inflation is likely to be more firmly within target by March (the print will come out in early April), enabling the BSP to cut the RRR any time after then,” HSBC said.
“Moreover, we expect RRR cuts to take precedent over any policy rate cuts.”
The first RRR cut took effect in March last year followed by another adjustment in June. In between these changes, policy makers fired off their first interest rate hike in May. Market watchers voiced confusion due to the seemingly contradictory thrusts, although the BSP clarified that RRR cuts should not be taken as a change in monetary policy stance.
Further RRR cuts were then shelved for the rest of 2018 as reining in surging inflation became the BSP’s main concern.

Peso climbs to three-week high

THE PESO strengthened to a three-week high on Friday, buoyed by cues from the central bank that inflation is on its way down and that dollar reserves have recovered.
The peso ended the week at P52.07 against the dollar, shaving 17 centavos from Thursday’s P52.24 finish. This is the currency’s best showing since Jan. 15, when the peso closed at P52.03 versus the greenback.
The local unit opened stronger at P52.175 against the dollar, but briefly touched P52.24 as its intraday low. It climbed to P52.07 as its strongest showing and settled there upon the market’s close.
Two traders interviewed by phone attributed the stronger peso to signals from the BSP following its decision to keep interest rates steady on Thursday.
“Yesterday, the Monetary Board’s decision was within expectation. The stronger peso is because of the lower inflation forecast, as well as the higher gross international reserves (GIR),” one trader said.
The Bangko Sentral ng Pilipinas’ (BSP) Monetary Board voted to keep benchmark rates between the 4.25-5.25% range amid a “manageable” inflation environment, and with strong signs that inflation is indeed on a sustained decline.
BSP Assistant Governor Francisco G. Dakila, Jr. even said the monthly inflation rate will return to below four percent by March, while the full-year forecast now stands at 3.1% for 2019, down from 3.2% previously.
On the other hand, the central bank also reported that gross international reserves (GIR) reached $82.132 billion in January, picking up from the $79.193-billion level logged the previous month to log a 20-month high.
The second trader added that the peso was an “outlier” compared to other currencies in the region, thanks to the BSP’s signals.
“We appreciated today after the BSP meeting. Markets were expecting unchanged (stance) but a dovish statement. They were neutral,” the trader said on Friday. “The market was also expecting a cut in the reserve requirement within this quarter, but with the statements, it won’t be in the short term. The dollar-peso traded lower on that.”
BSP Deputy Governor Diwa C. Guinigundo said further cuts to bank reserves will be introduced only when actual year-to-date inflation readings and inflation expectations return to the 2-4% target band, and when the local market is experiencing real tightness in liquidity conditions.
Dollars traded on Friday stood elevated at $1.233 billion, only slightly lower than the $1.269 billion that exchanged hands the previous day.
The first trader noted that this may be due to some offshore flows entering the Philippines, while the other trader said that part of the trades represent the BSP buying dollars to beef up the GIR even more. — Melissa Luz T. Lopez

Manulife Philippines launches real estate investment product

MANULIFE PHILIPPINES has rolled out a new investment platform which allows Filipino clients to invest in real property across Asia-Pacific, at a time when local real estate investment tools remain scarce.
The insurer said the Asia Pacific Property Income (APPI) Fund pools placements from investors — mainly in the US dollar — which are then parked under real estate investment trusts (REITs) across the region.
REITs work like mutual funds by pooling individual investments, but are specifically meant to purchase shares in properties like malls, hotels, warehouses, highways and office buildings and generate income from rental fees.
Ryan Charland, president and chief executive officer of Manulife Philippines, said investing through the APPI allows clients to diversify their portfolios.
“It is also a very good instrument to hedge against inflation,” Mr. Charland was quoted as saying in a statement sent on Friday.
The investment fund makes bets in REITs in Singapore, Hong Kong, Australia, Thailand, and Malaysia, while profits can be reaped twice a year.
The APPI is a feeder fund tucked into the Asia Pacific REIT Fund of Funds run by the firm’s subsidiary, Manulife Asset Management and Trust Corp. It can also be accessed via Manulife’s variable insurance products.
In the Philippines, a law supporting REITs has been in place since 2009 but authorities are yet to unlock its potential as an investment tool amid uncertainties on taxation and regulation. Property developers have been lukewarm to the rules so far due to extra costs from value-added tax, and since they would have little control over REITs due to a 40-67% public float under the current implementing rules.
Revised guidelines are being finalized by the Securities and Exchange Commission (SEC) and may be out by June, amid assurances sought by Finance Secretary Carlos G. Dominguez III that gains from the REITs will be reinvested in the Philippines.
The 12% tax on transfer of real properties has been removed by the Tax Reform for Acceleration and Inclusion Act that took effect a year ago. Meanwhile, the SEC said it is favoring a lower 33% minimum public ownership level. — Melissa Luz T. Lopez

PSE index slips on lack of fresh leads

By Arra B. Francia, Reporter
THE local stock market finished the week on a negative note on the lack of new catalysts to support its upward trajectory.
The benchmark Philippine Stock Exchange index (PSEi) tumbled 0.36% or 29.41 points to close at 8,070.89 on Friday. The broader all shares index likewise dropped 0.21% or 10.25 points to 4,896.32.
“PSEi ended flat after a lack of immediate catalysts led it to close 29 points down at 8,070.89. Index also saw weakness at the start of the day due to US markets closing in the red last night,” Papa Securities Corp. Sales Associate Gabriel Jose F. Perez said in an email.
Regina Capital Development Corp. Head of Sales Luis A. Limlingan also attributed the local market’s dip to the weakness of the US markets, while noting that the PSEi paused following the local central bank’s decision to keep rates steady on Thursday.
“Philippine investors took a breather after the BSP (Bangko Sentral ng Pilipinas) meeting announcement, the eurozone growth forecast being cut and the possibility Pres. Xi and Trump not meeting,” Mr. Limlingan said in a mobile message.
Following the Monetary Board’s first policy review for the year, benchmark rates remained within the range of 4.25-5.25%, in line with market consensus.
Mr. Perez noted that investors focused on Bloomberry Resorts Corp. and Petron Corp. on Friday, following the bourse operator’s announcement of the PSEi recomposition starting on Feb. 18. Bloomberry will be the newest addition to the PSEi, while Petron will be dropped from the 30-member list.
As a result, shares in Bloomberry surged 4.33% to P12.06 each, while shares in Petron lost 6% to P7.20 apiece.
Meanwhile, weakness in markets overseas is seen to be triggered by fears that US President Donald J. Trump will not meet with Chinese President Xi Jinping before their 90-day truce ends in March.
With this, the Dow Jones Industrial Average dumped 0.87% or 220.77 points to 25,169.53. The S&P 500 index retreated 0.94% or 25.56 points to 2,706.05, while the Nasdaq Composite index plunged 1.18% or 86.93 points to 7,288.35.
Locally, all sectoral indices ended in negative territory except for the counter for holding firms, which managed to climb 0.22% or 17.69 points to 8,033.
Leading the day’s decline was the industrial sub-index, which shed 0.99% or 116.15 points to 11,678.17. Financials fell 0.56% or 10.43 points to 1,847.39; property slumped 0.26% or 10.57 points to 3,997.85; services dipped 0.03% or 0.56 points to 1,619.34; while mining and oil went down 0.002% or 0.15 points to 8,739.62.
Turnover improved to P7.81 billion after some 3.16 billion names switched hands, versus the previous session’s P7.42 billion.
Decliners outpaced advancers, 119 to 98, while 34 names ended flat.
Net foreign buying persisted for the 16th straight session at P272.66 million, albeit slower than Thursday’s P610.59 million.

BSP steadies rates, cuts inflation view

By Melissa Luz T. Lopez
Senior Reporter
THE CENTRAL BANK on Thursday kept policy rates unchanged anew amid signs that inflation is on a sustained decline, with price increases sure to return to target soon.
The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) voted to keep benchmark interest rates steady on Thursday at the 4.25-5.25% range, marking the second straight meeting in which the policy-setting body held off adjustments.
“The Monetary Board’s decision is based on its assessment of a more manageable inflation environment,” BSP Governor Nestor A. Espenilla, Jr. said in a statement, as read by Deputy Governor Diwa C. Guinigundo during the media briefing yesterday afternoon.
“Latest baseline inflation forecasts show inflation settling within the target band of 3.0% ± 1.0 percentage point for 2019-2020, as price pressures continue to recede due to the decline in international crude oil prices and the normalization of supply conditions for key food items.”
“Inflation expectations have also declined further and are now aligned to the inflation target for 2019-2020,” he added.
This week’s decision was widely expected by market watchers, confident that the BSP will not budge on interest rates just yet.
The central bank raised interest rates in five consecutive meetings last year by a total of 175 basis points, just as inflation surged to the highest level in nearly a decade. The key policy rate currently stands at 4.75%, the highest in nearly a decade.
Inflation eased further to 4.4% in January, marking the third straight month of decline from a nine-year-high 6.7% in September and October although still above the 2-4% target band.
Central bank officials have said that this provides enough room to wait and see how the previous rate increases will be absorbed by the financial system.
Now, the BSP sees inflation risks “evenly balanced” for 2019, with the overall pace of price increases expected to slow further in 2020 despite a “more uncertain” global environment.
“Given these considerations, the Monetary Board deems the prevailing monetary policy settings to be appropriate, as previous monetary responses continue to work their way through the economy,” Mr. Espenilla added.
The central bank now expects inflation to trend even slower until next year, with price movements seen to return to target as early as March.
BSP Assistant Governor Francisco G. Dakila, Jr. said the latest forecast now stands at 3.1% for 2019, down from 3.2% previously, while the 2020 estimate was maintained at three percent.
“We still continue to expect inflation to settle below four percent by March of this year,” Mr. Dakila added.
The BSP official attributed the lower inflation forecast largely to a drop in world crude prices, with the estimate for Dubai crude down to $61.31 per barrel from $69.41/barrel in the December review.
Base effects will also come into play as price shocks from oil, food and excise taxes “dissipate.”
Nicholas Antonio T. Mapa, senior economist at ING Bank N.V. Manila, said the window is open for policy makers to unwind their previous tightening moves.
“BSP’s inflation forecasts validate that the BSP is likely done with its tightening cycle, with a policy reversal in sights given slowing growth momentum and inflation in-check,” Mr. Mapa said in a market report.
He noted that a cut in bank reserve requirement ratio (RRR) may be announced as early as this month. “We expect BSP to announce a reduction in reserve requirements at an off-cycle meeting given Governor’s assertions that the RRR is no longer a policy tool.”
London-based Capital Economics also said it expects a cut in interest rates amid a “worsening outlook” for the economy, after gross domestic product growth slowed to 6.2% from 2017’s 6.7%, well below the government’s 7-8% growth target for 2018.
The BSP’s next rate-setting review is on March 21.

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