MANILA – A boost from consumer spending could potentially drive the economy to grow by 6.5 to 7.0 percent next year, the Bank of the Philippine Islands (BPI) said Thursday.
“If we see a good correction in interest rates next year because of lower inflation, the spending side will continue to benefit,” BPI lead economist Emilio Neri told reporters in a press conference in Makati City.
“If inflation can go back within the target of the Bangko Sentral ng Pilipinas, not only will we benefit through a recovery in household final consumption, the interest rate environment will be more favorable than how it is today,” he said.
The central bank’s Monetary Board expects inflation to settle at 3.5 percent, or within its target range of 2.0 to 4.0 percent.
Spending may also see a boost from a cut in the reserve requirement next year, a move which will increase the amount of money in circulation, notes Neri.
“GDP growth should be 6.5 to 7.0 percent, maybe a little bit more, if BSP can cut its reserve requirement by more than 2 percentage points next year,” he said.
The reserve requirement ratio, or the amount of cash a bank must hold in reserves against clients’ deposits, is currently at 18 percent.
This compares with 0.8 percent in Japan, 3.0 percent in Vietnam, 3.5 percent Malaysia, and 4 percent in both India and Taiwan.
BSP governor Nestor Espenilla Jr. personally wants to cut the reserve requirement ratio to single-digit level under his term.
This year, Neri earlier said economic growth is expected at 6.3 percent—slower than the 6.7 percent registered for the full year 2017.
For its part, the Department of Finance expects economic growth at 6.8 percent this year.
The inter-agency Development Budget Coordination Committee (DBCC) has lowered its 2018 growth target to 6.5 to 6.9 percent from 7.0 to 8.0 percent. (GMA News)
