BSP rate cuts not enough to stimulate growth - GlobalSource

THE policy easing cycle by the Bangko Sentral ng Pilipinas (BSP) will not be enough to revive the country's slowing economy, not without fiscal support, structural reform and a vital banking sector, GlobalSource Partners said.

- BY THE MALAYA BUSINESS NEWS TEAM

GlobalSource country analyst Diwa Guinigundo said the BSP's series of policy rate cuts amid the economic growth slowdown and low inflation seemed "well supported by macroeconomic conditions (but it) also highlights the inherent limits and responsibilities embedded in flexible inflation targeting."

"Despite substantial cumulative rate reductions, economic momentum has yet to respond decisively. Private consumption remains soft, business confidence weak and tentative, and investment activity highly uneven," he said in a paper "Monetary policy: Wake-up call to Malacañang and Congress" released late Monday.

Limited loan growth

Guinigundo, a former BSP deputy governor, said monetary policy transmission is also "constrained by the behavior of the banking system itself." He said banks are in a pro-cyclical mode, despite the fact that the BSP has been on an easing cycle since August 2024, reducing the policy rate by a cumulative 225 basis points so far.