BANGKO SENTRAL ng Pilipinas Governor Benjamin E. Diokno said it may be more apt to push for fiscal stimulus rather than monetary easing as the government looks to shield the country against the economic fallout from the spread of the coronavirus disease 2019 (COVID-19), even as he said a policy rate cut may still be on the table this year.
“At this time, maybe the fiscal stimulus is much more effective than monetary stimulus. Kasi if you’re going to stay at home…then you’re not going to spend money, wala masyadong stimulus d’un (Because if you’re staying at home, then you’re not going to spend money. There will be no stimulus from that end),” Mr. Diokno told reporters on the sidelines of his book launch held in Pasay City on Monday.
“On the other hand if…we accelerate the Build, Build, Build program, mas effective ’yun (it will be more effective) to address the slowdown,” he said.
The government targets gross domestic product (GDP) growth of 6.5-7.5% this year, coming from a 5.9% expansion in 2019 which fell short of the minimum six percent goal.
Economic managers have said GDP growth could take a hit from the virus, with the extent of the impact dependent on how long the outbreak persists.
Despite this, Mr. Diokno said another 25-basis-point (bp) cut is still on the table for the year, adding that they will assess anew the impact of the virus on the economy during the Monetary Board’s policy-setting meeting on March 19.
Amid the continued spread of the COVID-19, Mr. Diokno said that they are not “totally ruling out” another cut, but this will depend on their assessment of risks from the virus outbreak.
“The 50 [bps] that I promised last year, we’re done with 25 [bps]. That’s still on the table. And we’re going to meet on March 19. So we’ll see what’s happening,” Mr. Diokno said.
The BSP chief said in December that the BSP is looking to cut rates by 50 bps this year as they continue to unwind the 175 bps in hikes done in 2018 amid rising inflation.
The Monetary Board on Feb. 6 already cut rates by 25 bps as a “preemptive move” as COVID-19 caused fears of a possible economic slowdown in financial markets. This followed the 75 bps worth of cuts done in 2019.
The rates on the BSP’s reverse repurchase, overnight lending and deposit facilities now stand at 3.75%, 4.25%, and 3.25%, respectively.
Mr. Diokno previously said the country has enough fiscal and monetary space, which will allow the government to help soften the blow from the spread of COVID-19.
“To me there are many other things that we can do, like maybe yung (reforms on) ease of doing business… [Those are] the things we need to do with or without the COVID-19 virus,” he said on Monday.
“Let’s do it now habang (while) the whole world is in shambles so that, as I said, when things recover, then we will be stronger,” Mr. Diokno added. — L.W.T. Noble