Rate adjustments deferred by BSP. Domestic economy stable enough to sustain inflation. Excise tax under CTRP also being staggered.

BSP defers rate changes.

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According to the expectations of the experts in the field, there was no change in the interest rates. After putting their minds to it, the consensus was that, for the present, interest rates should remain steady.
Moreover, the United States Federal Reserve has hiked its interest rates twice in the last quarter. The Governor of the Bangko Sentral ng Pilipinas announced that the monetary board has reached a decision.
Amando Telangco Jr. stated that the policy rates had been left untouched for the time being.
Thus, the policy rates will remain as follows:
• 2.5% for the overnight deposit facility,
• 3.5% for the overnight lending facility, and
• 3.0% for the overnight reverse re-purchase facility.
In addition, the Monetary Board of the BSP also left unchanged the Reverse Requirement ratio (RRR) at 20%. This decision of the Monetary Board results from the favorable prospects of growth.
Consequently, the BSP estimates that inflation would remain at a reasonably manageable level. In conformity to the targeted expectations of inflation, it will remain in the range of 2 to 4%.
Experts in the economic field predicted a growth rate of 6.5 to remains upward poised due to the various factors. Leading among these factors are the adjustments towards electricity rates and fares of transportation sector.7.5 percent in the Gross Domestic Product (GDP). The GDP has seen consistent growth over the past 72 quarters without a break.
However, it did experience a slight dip to 6.6% in the fourth quarter from 7% in the third. The growing economy posted 6.8% over the last fiscal and remained closer to the projected high of 7%.
Furthermore, Telangco elaborated that the advanced economies altering their macroeconomic policies created uncertainty. This is a real risk to the outlook of the inflation.
Moreover, the Monetary Board took note that removal of restrictions on import of rice benefited inflation. The Monetary Board also forecasted a firm economy riding on the back of:
• Higher government spending,
• Easier availability of credit,
• Enhanced domestic economic activities,
• More investments by the private sector, and
• Improved liquidity.
Consequently, the forecast for inflations is to go lower to 3.4% for 2017 and 3% for 2018. Diwa Guinigundo, Dy. Governor of the BSP, informed this.
She also informed that, due to higher prices of oil and food items, inflation rose to 3.3% in February from 2.7%. Consequently, the average inflation for the first two months rose to 3% which is a median point of the forecast of 3% to 4%.
Importing Rice had become easy for all clients, whether corporate, individuals, or cooperatives. They just had to pay 35% of the cost as advance provided they fulfill the conditions. This tariff gained from import of Rice is channeled back to increase the functioning of the agricultural sector.
There is also a provision to absorb the impact of the hike in the Excise Tax on fuel products. The hike under the Comprehensive Tax Reform Program (CTRP) is being staggered over three years.
The scheme would run as follows:
• P3 per liter during the first year,
• P2 per liter for the second year, and
• P1 during the third year; this is the final year.
Therefore, Guinigundo opined that, the domestic economy being sound, the policy stance needs no modifications.
Thus, monetary support or packages of stimuli are not required or forthcoming.
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Umrao Singh
Umraoz.wordpress.com
Written for: Lars-Magnus Carlsson
www.philippinepride.com
Friday, March 24, 2017

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