Rate cut won't offset corruption's impact

The Bangko Sentral ng Pilipinas (BSP) is expected to deliver a quarter-point interest rate cut next month, but an economist warned the move would not restore lost government credibility or offset the impact of corruption amid expectations of further economic slowdown.

- BY DERCO ROSAL

Union Bank of the Philippines Economist Carlo Asuncion said he anticipates the central bank will cut the key rate by 25 basis points at its final Monetary Board meeting this year, though he argues a sudden easing will fail to restore eroded trust in the government.

"Markets recognize that monetary policy is not at the root of the macroeconomic challenge, and a knee-jerk rate cut will not restore lost government credibility," Asuncion in a LinkedIn report published last Friday, Nov. 14.

"BSP easing cannot address or offset the impact of blatant government corruption, which has already resulted in a cutback in infrastructure spending during the third quarter," Asuncion added.