2 months ago
16
Upgrade to High-Speed Internet for only ₱1499/month!
Enjoy up to 100 Mbps fiber broadband, perfect for browsing, streaming, and gaming.
Visit Suniway.ph to learn
The Bangko Sentral ng Pilipinas (BSP) is expected to finally push through with its much-awaited reduction in key interest rates to protect the economy from the likelihood of a wider negative outlook gap, no thanks to United States (US) President Donald Trump's reciprocal tariffs.
In an April 4 report sent to journalists on Tuesday, April 8, Deutsche Bank Research said the April 10 BSP Monetary Board policy meeting will likely yield a 25-basis point (bp) rate cut.
"Inflation in March of 1.8 percent year-on-year breached the BSP's lower limit, and the central bank earlier also expected the negative output gap to persist until end-2026," the research arm of investment banking giant Deutsche Bank noted.
According to Investopedia, a negative output gap "suggests that actual economic output is below the economy's full capacity for output."
Despite the Philippines' relatively lower 17-percent reciprocal tariffs and its also relatively smaller share of exports to the US—at 2.6 percent of gross domestic product (GDP), compared to about 10 percent for the entire Association of Southeast Asian Nations (ASEAN)—Deutsche Bank Research warned that "second-round spillover effects, including on sentiment, are likely to be significant."
"This will inevitably present downside risk to the Philippine economy, and we expect its negative output gap to widen," it added.
"Peso movements over the past month have been fairly muted compared to peer currencies. These factors combined reinforce our view of further easing from the BSP, sooner rather than later," according to Deutsche Bank Research.
In a press briefing on Wednesday, April 9, Teresa Mendoza, senior economics officer at the Asian Development Bank's (ADB) Philippines country office, said that the Manila-based multilateral lender's baseline projection is further BSP monetary policy easing amid modest inflation and close-to-record-high real policy rates.
Mendoza said "measured" monetary easing amid anchored inflation and the reduction in the banks' reserve requirement ratio (RRR) "will really help" the economy navigate through challenges.
As for Trump's tariffs, Cristina Lozano, acting country operations head at the ADB's Philippines office, said the country stands to benefit from its preliminary position of strength, supported by easing inflation, lower unemployment, and sustained public investment, despite the unfolding uncertainties.
It also helps that the semiconductors—the Philippines' top merchandise exports—and services sectors are excluded from the new tariffs, Lozano said.
In an April 9 report, debt watcher Moody's Ratings said that lower-tariff countries in Asia-Pacific may gain marginal market share from possible trade triangulation to supply the US market during the near term.
"For example, Malaysia, India, and the Philippines, which are subject to tariff rates in the middle band (10- to 30-percent range), may benefit from some trade diversion activity," Moody's said.
