BSP likely to start cutting rates in Q3, analysts project
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ITH consumption hurting the country’s recent economic performance, analysts said the Bangko Sentral ng Pilipinas (BSP) is expected to start cutting rates as early as the third quarter. In its latest Country Risk & Industry Research, BMI, a unit of Fitch Solutions, projects a rate cut by the Monetary Board in July when the United States Federal Reserve is also expected to cut rates. Last week, the Philippine Statistics Authority (PSA) reported that the country’s GDP growth averaged 5.7 percent, slower than the 6.4 percent in the first quarter but faster than the 5.5 percent posted in the last quarter of 2023.
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(See: https://businessmirror.com. ph/2024/05/10/spending-cutbacksto-continue-say-experts/) “Our forecast incorporates a rate cut by the central bank in July, the same month we expect the Fed to begin easing, which is a more dovish view compared with market positioning,” BMI said in a report. High interest rates, BMI noted, caused a decline in investments in the first three months of the year. The tight monetary policy made borrowing costs soar. BMI said, however, that the El Niño is expected to affect food production, pushing commodity prices up and delaying any disinflation.
“The result is largely consistent with our 6.2 percent full-year growth forecast, which we maintain. Labor market conditions have tightened, and we still expect looser monetary policy to lift economic activity over the coming quarters,” it added. Meanwhile, the Bank of the Philippine Islands (BPI) also expects the US Federal Reserve movements to have significant weight on BSP’s monetary policy. BPI expects the BSP to start easing monetary policy by the third or fourth quarter. If inflation stabilizes and the Fed cuts rates, this will convince monetary authorities to reduce key interest rates. But overall, BPI expects BSP to “em-
brace a cautious approach to monetary policy” by keeping rates high in the first semester of 2024. “Easing its monetary policy may also be contingent on the Federal Reserve’s future policy move. If local inflation conditions are right, the BSP will likely respond immediately with rate cuts once the Fed begins its easing cycle,” BPI said. Any easing of the monetary policy would bode well for the embattled Philippine peso. The peso has been taking a beating since April 18 when the peso traded downward to P57.203 to the US dollar from P56.971 to the greenback on April 17.
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See “BSP,” A2
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NET FDI INFLOWS UP 29%, n
Monday, May 13, 2024 Vol. 19 No. 209
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HIT $1.36B IN FEB: BSP A
By Cai U. Ordinario
@caiordinario
SURGE in equity and investment funds as well as equity placements boosted the country’s foreign direct investment (FDI) net inflows in February 2024, according to the Bangko Sentral ng Pilipinas (BSP). corded in January-February 2023. “The growth in FDI reflects sustained investor confidence in the country’s macroeconomic fundamentals and resilience amid persistent inflationary pressures and global economic uncertainties,” BSP said. The data also showed that under net investments in equity capital, there was a 660.2-percent increase in placements: reaching $857 million in February 2024 from $113 million in the same period in 2023. Withdrawals, however, also showed a 142.1-percent increase to $93 million in February 2024 from $38 million. However, compared to $110 million posted in January 2024, the February withdrawals was lower. See “Net,” A2
USDA EXPECTS PHL TO REMAIN TOP GLOBAL RICE IMPORTER By Ada Pelonia
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HE Philippines will remain as the world’s largest importer of rice as it will purchase 4.2 million metric tons (MMT) in 2025, according to a report published by the United States Department of Agriculture (USDA). “The Philippines imports are forecast up to a record 4.2 million tons on continued growth in consumption. The Philippines is expected to again be the largest global rice importer,” the latest monthly report on global grains trade read. The USDA has projected in its monthly report that the Philippines will import to feed its growing population and the increasing number of tourists who will visit the country. Indonesia, the USDA said, will see the biggest change in rice imports next year due to larger crops and carry-over stocks. “In 2025, the largest change for rice imports is for Indonesia where imports are forecast down 2.0 million tons to 1.5 million tons due to a larger crop and sufficient beginning
stocks,” the report read. The decline in Indonesia’s rice import would impact the rice exports in Thailand and Vietnam, with USDA’s projections down 900,000 metric tons (MT) and 500,000 MT, respectively. “Thailand rice exports are forecast at 7.5 million tons, down 900,000 tons from the prior year. Lower demand is expected from Southeast Asia, particularly from Indonesia,” USDA said. “Vietnam exports are forecast at 7.5 million tons, down 500,000 tons from the prior year, primarily due to sharply lower demand from Indonesia.” The Philippines and China, which account for over 50 percent of Vietnam’s exports, were expected to continue purchasing large amounts of rice. The Philippines’s unmilled rice production declined by 1.96 percent to 4.69 MMT in the first quarter of 2024 from the 4.78 MMT recorded in the same period in 2023, according to data from the Philippine Statistics Authority (PSA). See “USDA,” A2
SKYLINES AND BOTTOM LINES Skyscrapers dotting the skyline of Bonifacio Global City in Taguig City symbolize the area’s thriving urban landscape. Recent reports showcase a still vibrant Philippine economy: growth of 5.7 percent in gross domestic product in the first quarter, a rate on par with Vietnam’s and outpacing several economies across Asia. NONIE REYES
Sofitel closure to further hike room rates in 5-star hotels By Ma. Stella F. Arnaldo
@akosistellaBM Special to the BusinessMirror
T
HE closure of the 48-yearold Sofitel Philippine Plaza will likely compound the increase in room rates of hotels in its category, many of which are already charging higher than prepandemic rates. In a Viber message to the BusinessMirror, Leechiu Property Consultants (LPC) Director for Hotels, Tourism & Leisure Alfred Lay lamented the closure of the iconic leisure property by the bay, once popular for its spectacular views of the sunset over Manila Bay. “It’s sad to hear of the closure of such a prominent property in the Metro Manila landscape. This will exacerbate the increase in room rates across both the upscale and luxury hotel markets, specifically for the
luxury segment in Metro Manila, which had already logged 21-percent increased room rates in 2023 versus 2019.” As per LPC research, the average daily rate (ADR) of luxury hotels in Metro Manila outpaced a l l hotel seg ments, reaching P10,264 per night in 2023 from P8,429 in prepandemic 2019, despite a dip in their average occupancy rate to 69 percent from 71 percent in 2019. The ADR of upper upscale hotels rose to P6,945 per night last year, from P6,354 in 2019, and registered higher average occupancy at 75 percent in 2023 from 65 percent in 2019. Philippine Plaza Holdings Inc., owner of Sofitel Manila, has said it is closing the property for safety reasons, and is studying its possible renovation, estimated to cost roughly P8.6 billion. See “Sofitel,” A2
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PESO EXCHANGE RATES n US 57.3830 n JAPAN 0.3691 n UK 71.8722 n HK 7.3432 n CHINA 7.9465 n SINGAPORE 42.4274 n AUSTRALIA 37.9818 n EU 61.8761 n KOREA 0.0421 n SAUDI ARABIA 15.3005 Source: BSP (May 10, 2024)
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The data showed the foreign direct investment (FDI) net inflows grew 29.3 percent year-on-year to reach $1.36 billion from the $1.06 billion net inflows in February 2023. The data showed a 480.4-percent increase in equity and investment fund shares, and nearly a thousand percent increase in net investments in equity capital. “This development was due to the 927.3-percent expansion in nonresidents’ net investments in equity capital [other than reinvestment of earnings] to $764 million from $74 million in February 2023,” according to BSP. BSP said the developments brought the cumulative FDI net inflows in January-February 2024 to $2.3 billion, higher by 48.2 percent than the $1.5 billion net inflows re-