By Luisa Maria Jacinta C. Jocson, Reporter

CEBU — The Philippine central bank’s easing cycle is still underway though it may opt to keep rates steady at its December meeting, its top official said.

“We’re still in the easing cycle. Either we cut in December, or we cut in the next meeting, but gradually,” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. told reporters on the sidelines of the BSP-International Monetary Fund (IMF) Systemic Risk Dialogue in Mactan, Cebu on Tuesday.

Asked if the central bank could keep interest rates steady at its December meeting, Mr. Remolona said in mixed English and Filipino: “Yes, of course. It depends on the data. We are still not sure about December.”

Mr. Remolona reiterated that the central bank will continue to make rate cuts in 25-basis-point (bp) increments.

He earlier said the BSP may not necessarily reduce rates at every quarter or every meeting.

Since it began its easing cycle in August, the BSP has reduced borrowing costs by a total of 50 bps so far.

The Monetary Board has delivered a 25-bp cut at its meetings in August and October, bringing the benchmark to 6%.

Mr. Remolona had earlier signaled the possibility of a 25-bp cut on Dec. 19, the Monetary Board’s final policy meeting this year.

Meanwhile, he said the weak gross domestic product (GDP) growth in the third quarter was likely an “aberration” and that growth would likely recover in the fourth quarter.

The Philippine economy grew by a weaker-than-expected 5.2% in the third quarter, its slowest growth in five quarters.

This brought GDP growth in the nine-month period to 5.8%. The economy needs to grow by at least 6.5% in the fourth quarter to ensure it can hit the low end of the government’s 6-7% full-year target.

Instead, the central bank is monitoring closely the latest inflation data, Mr. Remolona said.

“The next number to expect is the November inflation number, we’ll see what that is. Our expectation is that it will still be within the target band.”

Headline inflation picked up to 2.3% in October, bringing the 10-month average to 3.3%. This was still within the BSP’s 2-4% target range.

For 2025, the BSP chief said that the Monetary Board could likely deliver rate cuts at the 100-bp range.

“That’s not exact. It could be more, could be less, but that’s in the ballpark,” he added.

PESO PERFORMANCE
Meanwhile, the BSP governor said he is not worried about the peso’s recent performance.

“It’s below P59. We don’t worry so much about whether the peso depreciates, appreciates. We worry about the pass-through effect. Right now, it’s still okay,” Mr. Remolona said.

The peso closed at P58.81 per dollar on Tuesday, depreciating by 13 centavos from its P58.68 finish on Monday, Bankers Association of the Philippines data showed.

Markets are keeping an eye out for whether the peso will sink to the P59-per-dollar level. The peso fell to the record low of P59 per dollar in October 2022.

However, he said the central bank has been intervening in “small amounts.” “A little bit just so it won’t (depreciate sharply against the dollar),” he said.

“We leave it to the guys in the financial markets area, but if it depreciates very sharply, then we talk. If it’s not too sharp, it doesn’t become inflationary. It’s inflationary if it’s sharp and persistent.”

He said the recent peso weakness was expected after Donald J. Trump was elected US president. The US dollar has been on the rise amid market expectations Mr. Trump would implement higher tariffs that could fuel inflation and slow the Federal Reserve’s planned rate cuts.

“We monitor the swings that take place over a few months, not day by day. It is usually expected that the night before, this kind of news will put pressure on the peso.”

CEBU — “Tit-for-tat” retaliatory tariffs could hurt the growth outlook for the Asia-Pacific region, the International Monetary Fund (IMF) said.

“In a region like Asia, which has benefited a lot from globalization, from greater integration with the rest of the world, any kind of tariff or trade restrictions will have an impact,” Krishna Srinivasan, director of the IMF’s Asia and Pacific Department, said at the Bangko Sentral ng Pilipinas (BSP)-IMF Systemic Risk Dialogue here on Tuesday.

“Our analysis shows that over the long run, everybody hurts because the size of the pie becomes that much smaller. So, every country, including the Philippines, will hurt in the long run.”

Mr. Srinivasan said that “tit-for-tat retaliatory tariffs” could threaten growth prospects across the region as it could disrupt supply chains.

“When you have fragmentation, which is across trade and investment and so on, all the work we have done shows that in the long run, every country hurts.”

Global trade could be upended if US President-elect Donald J. Trump pushes through with his campaign promise to impose a 60% tariff on Chinese-made goods and at least a 10% tariff on all other imports.

Such a move could stoke inflation and derail the Federal Reserve’s easing cycle, as well as negatively impact growth in exporting countries like the Philippines.

National Economic and Development Authority Secretary Arsenio M. Balisacan earlier said Mr. Trump’s tariff plan is a cause for worry due to its potential impact on the global economy.

The Philippines heavily relies on the United States for business and economic activity, as it is the top destination of Philippine-made goods and is the biggest source of overseas Filipino worker remittances.

“If China slows down because of fragmentation, it’s going to affect you. If the US slows down, it’s going to affect you,” Mr. Srinivasan said.

“One way or the other, over the long run, all countries will hurt from fragmentation and the risks we have seen have only increased over the past few years,” he added.

Escalating trade tensions could impact financial markets, increase trade costs and affect domestic demand, Mr. Srinivasan said.

In its World Economic Outlook, the IMF expects economic growth in Asia to average 4.4% in 2025, faster than the 3.2% growth for the global economy.

IMF data show that Asia is forecasted to contribute about 60% to global growth this year.

“Growth outlook in Asia remains robust and inflation pressures have eased, thanks to the region’s central banks’ ability to anchor inflation and inflation expectations effectively,” Mr. Srinivasan said.

The IMF sees Philippine gross domestic product (GDP) expanding by 6.1% in 2025.

On the other hand, BSP Governor Eli M. Remolona, Jr. said that the exact spillover effects from Mr. Trump’s policies on the Philippines remain to be seen.

“We don’t know exactly what the tariffs will be because of the size of the tariffs that are being contemplated. We don’t really know what the effects will be. So we have to wait and see, and then we’ll figure it out,” he said.

The BSP chief said that the country’s balance of payments (BoP) is less likely to be impacted by tariff measures.

“In the case of the Philippines, our BoP shows that our service exports are just as large as our goods exports. Our services exports, you have business process outsourcing (BPO) revenues and then we have remittances from abroad,” he said.

“These are less easily subject to tariffs, because these things, BPO business goes over the internet. Whereas remittances, the workers are abroad, or they’re on ships. So maybe we’re a little bit insulated from the tariffs.”

Mr. Remolona also noted the impact of the tariff restriction on Chinese-made goods.

“At the same time, China remains our number one source of imports to the Philippines. If those imports cannot enter the United States easily, then they might send us more of those imports, probably less expensive imports than before. Those are kind of second-round effects that we have to figure out.”

OTHER RISKS
Meanwhile, Mr. Srinivasan also flagged the risks that less regulated, nonbank financial institutions (NBFI) pose to the overall financial system.

“These developments could amplify negative shocks, especially given the worsening risk landscape and increased uncertainties with significant implications for financial stability.”

“For instance, the nonbank financial institutions being more agile and subject to fewer constraints can leverage AI in many ways that pose challenges for financial regulators.”

Mr. Remolona also noted the rapid growth of NBFIs.

“The nonbank financial sector has noticeably grown since the Global Financial Crisis. On one hand, this is welcome news because it addresses some of the concentration risks that arise from relying too much on the banking industry,” he said.

Latest data from the BSP showed that NBFIs’ total resources rose by 5.3% to P5.525 trillion as of end-June from P5.248 trillion a year ago.

“On the other hand, financial markets are never an ‘either- or.’ There is much diversity within nonbank financial institutions, just as there are inter linkages with nonbanks and banks,” Mr. Remolona said.

“In exchanging interlinkages, its opportunities and risks should be of great interest to regulators and practitioners.” — Luisa Maria Jacinta C. Jocson