THE BANGKO SENTRAL ng Pilipinas (BSP) is expected to keep an accommodative stance to help boost credit growth while banks and borrowers remain cautious, the ASEAN+3 Macroeconomic Research Office (AMRO) said.
Dr. Zhiwen Jiao, AMRO’s lead economist on the Philippines, noted that credit growth has remained muted despite ample liquidity in the financial system, showing more needs to be done to encourage lending.
“The most recent survey on the issue shows that lending standards remain tight, so policy measures that temper the banks’ aversion to risk should help boost credit growth and support economic recovery,” Dr. Jiao said.
The latest Senior Bank Loan Officers’ Survey showed majority of banks kept their overall loan standards, with net tightening of lending rules seen for both businesses and retail borrowers in the third quarter.
Bank lending in August increased 1.3%, ending eight consecutive months of decline.
The BSP has released some P2.2 trillion in liquidity through the financial system through various policy measures, which is equivalent to about 12.1% of gross domestic product.
Central bank officials have stressed the need to keep monetary policy supportive of growth to boost recovery efforts while demand remains muted.
“This stance is appropriate, given the country’s still large output gap and notwithstanding the high headline inflation which will likely decline to within the government target inflation range,” Dr. Jiao said, noting they expect inflation to go back to within the central bank’s 2-4% target by 2022.
Inflation stood at 4.8% in September, easing from 4.9% in August.
BSP Governor Benjamin E. Diokno has said rates will likely stay unchanged until the end of the year as they want to continue supporting the economy, even as other central banks have started tightening due to higher inflation.
The Monetary Board in September kept benchmark rates at record lows, even as it raised its inflation forecast. Two more policy-setting meetings are left this year, which are scheduled on Nov. 18 and Dec. 16. — L.W.T. Noble