Philippines – Monetary authorities said yesterday that a higher economic growth next year won’t stoke inflation as long as the government manages to keep its budget deficit in check.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said the central bank could manage the impact of higher economic growth on inflation as long as the government’s budget shortfall is not premised on huge borrowing and wasteful public spending. “In fact, there were instances in the past when we achieved a great deal of convergence between high economic growth and stable inflation. That is close to an ideal situation that should be made durable over the long term,” Guinigundo stressed.
The Cabinet-level Development Budget Coordination Committee (DBCC) has kept its revised gross domestic product (GDP) growth target of five percent to six percent this year but raised its GDP growth target next year to seven percent to eight percent. However, the DBCC decided to keep the inflation target of 3. 5 percent to 5. 5 percent this year and three percent to five percent for next year set by the BSP. The central bank is likely to lower its inflation forecast for this year and next year during its scheduled meeting today as inflation eased surprisingly to a seven-month low in June.
Last June 3, the central bank slashed its inflation forecast to 4. 7 percent from 5. 1 percent for this year and to 3. 6 percent from 3. 7 percent for next year in light of the reduction of power costs, lower oil prices, steady commodity prices, moderate liquidity growth, and the continued strengthening of the peso against the US dollar [pic] .The latest inflation forecast also took into consideration the stronger-than-expected gross domestic product (GDP) growth registered in the first quarter of the year. The country’s GDP zoomed to its fastest pace in almost three years after expanding by 7. percent in the first quarter of the year from only 0. 5 percent in the same quarter last year. Latest data from the National Statistics Office (NSO) showed annual inflation eased to a seven-month low of 3. 9 percent in June form 4. 3 percent in May bringing the average inflation to 4. 2 percent for the first half of the year from 5. 0 percent in the same period last year. Inflation last month was the lowest since 2. 8 percent recorded in November last year. “If we succeed in reaching that point, the issue of inflation will be less of an issue because much of the supply side risks would be effectively addressed,” Guinigundo explained.
Singapore-based DBS Bank Ltd. and Switzerland-based UBS AG said the BSP’s policy-setting body is widely expected to keep its overnight borrowing rate and overnight lending rate steady on July 15. UBS economist Edward Teather said in its Asian Economic Comment entitled “Asean Monetary Policy Update” that unlike the Bank of Thailand the BSP is likely to keep its key policy rates unchanged this week. “We expect an initial 25 basis points policy rate increase from the Bank of Thailand on July 14 but not the BSP on July 15,” Teather stressed.
Aside from the Philippines and Thailand, he pointed out that Bank Indonesia has yet to adjust its key policy rates while other banks such as Taiwan and Malaysia have raised their policy rates. The policy-setting body has kept its policy rates unchanged for eight consecutive policy-setting meetings since The policy-setting body has kept its policy rates unchanged for eight consecutive policy-setting meetings since July last year in the face of uncertain global economic prospects and with recovery proceeding at different stages and speeds in various parts of the world.
The BSP has lifted all its crisis-intervention measures since the start of the year except for the reduction of the reserve requirement for banks to 19 percent from 21 percent in its bid to release more liquidity into the financial system to soften the impact of the global economic meltdown. Last January 28, the BSP raised the rate on a short-term lending facility to four percent from 3. 5 percent marking the start of an exit strategy with the tweaking of exiting liquidity enhancing measures.
Last March 11, monetary authorities reduced the peso rediscounting budget to P40 billion from P60 billion, restored the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument, and restored the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points. Last April 22, the central bank continued unwinding of crisis intervention measures that were adopted since November of 2008 by further reducing the budget for peso rediscounting facility to to pre-crisis level of P20 billion from P40 billion.
MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) has decided to keep its key rates at a record low for ninth consecutive policy-setting meetings since July last year amid the uncertainty over the strength and pace of the global economic recovery as well as benign inflation outlook, BSP Governor Amando M. Tetangco Jr. announced yesterday. In a press conference, Tetangco said the BSP decided to keep its overnight borrowing or reverse repurchase rate at a record low of four percent and its overnight lending or repurchase rate at six percent Likewsie, the interest rates on term reverse repurchase facility, repurchase facility, and special deposit accounts (SDAs) were also left unchanged. This was the ninth straight meeting wherein the board decided to keep its policy rates unchanged.
During the height of the global financial crisis, the BSP slashed its key policy rates by 200 basis points between December 2008 and July 2009 but introduced several liquidity-enhancing measures to cushion the impact of the global economic meltdown. “The Monetary Board also noted that the uncertainty over the strength and pace of the global economic recovery warranted maintaining current policy settings,” Tetangco said.
The BSP chief also cited the benign inflation outlook as consumer prices are expected to stay within the 3. 5 percent to 5. 5 percent as well as three percent to five percent target set by monetary authorities for this year and next year. “The Monetary Board’s decision was based on its assessment that current monetary policy settings continue to be appropriate, given the favorable inflation outlook and on-target inflation expectations,” he added.
Apart from keeping its key policy rates unchanged, the BSP also decided to put on hold further withdrawal of liquidity enhancing measures. Monetary authorities started to phase out liquidity enhancing measures that were implemented way back in November 2008 as early as January 28 in light of the gradual global economic recovery. The Monetary Board decided to increase the rate on a short-term lending facility to four percent from 3. 5 percent.
Other crisis-related measures that were tweaked included the reduction of the peso rediscounting budget to P40 billion and further to pre-crisis level of P20 billion from P60 billion, the restoration of the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument, and the restoration the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points. However, monetary authorities decided to maintain the reserve requirements for banks.
As part of its liquidity enhancing measures to cushion the impact of the global financial meltdown in 2008, the BSP slashed the reserve requirement of banks to 19 percent from 21 percent to release more liquidity into the financial system. July 13, 2010 July 16, 2010 BSP checks expenses, perks of bank execs James Konstantin Galvez MANILA, Philippines—The Bangko Sentral ng Pilipinas will closely monitor banks’ spending on fringe benefits and bonuses of directors and officers due to rising budget allocations for such expenses.
In a report, the BSP said banks’ spending would have to be scrutinized given that more than 75 percent of their operations are funded by deposits from the public. “The BSP is keeping a close watch on the fringe benefits and bonuses paid to directors and key officers of BSP-supervised institutions,” the central bank said in its latest report on the country’s financial system released last week. Data from the central bank showed that banks spent an aggregate amount of P74. 7 billion last year for fringe benefits and bonuses of officers and directors, constituting nearly 36 percent of their total non-interest expenses.
Other non-interest expenses are tax payments, license renewals and depreciation of assets, among others. The regulator said in the report that the share of compensation, fringe benefits, and bonuses to total non-interest expense of banks in 2009 grew from P67. 5 billion the previous year, a rise of 33. 8 percent. Fringe benefits, including directors’ fees, accounted for P16. 2 billion or nearly 8 percent of total non-interest expenses of banks last year. This was up by almost 21 percent from P13. billion, or 7 percent of total non-interest expenses of banks the previous year. The rise in banks’ spending for fringe benefits last year was much faster than the annual inflation during the period, which stood at only 3. 9 percent. Although the BSP does not yet consider banks’ current spending for fringe benefits and bonuses as anomalous, the regulator said it found merit to closely watch bank expenditures as a means to safeguard public money. The BSP said it would not want to see the country’s banking sector go the way of the US financial sector. Following the highly publicized outrage of American taxpayers on exorbitant bonuses paid to officers of the ailing insurer, American International Group, which received $180 billion in bailout money from the Federal Reserve in 2008, the BSP will keep a close watch on supervised banks,” the BSP said. |BSP dividends to National Government up 46%
MANILA, Philippines – The amount of dividends to be remitted by the Bangko Sentral ng Pilipinas to the National Government grew by more than 46 percent this year after the BSP posted higher earnings. BSP Governor Amando M. Tetangco Jr. said in an interview with reporters that the central bank would remit about P9. 8 billion worth of dividends to the national coffers this year or about P3. 1 billion higher than the P6. 7 billion it remitted last year. Tetangco said the amount to be remitted this year would be the second biggest, with the highest being the P10. billion dividends declared in 1997. Republic Act 7658 or the dividends law requires government-owned and controlled corporations (GOCCs) and government financial institutions (GFIs) to remit 50 percent of their net income to the National Government. However, RA 7553 or the New Central Bank of 1993 requires the BSP to declare 75 percent of its net earnings as dividends in favor of the National Government. July 12, 2010 Based on its unaudited financial statement, the BSP’s net income reached about P13 billion last year or about 45 percent higher than the P8. 93 billion it earned in 2008.
Last year, the central bank remitted about P6 billion to the national coffers and another P696. 33 million in the first half of the year to complete its dividend payments for its earnings in 2008. For its net income last year, Tetangco said the BSP remitted P4. 475 billion as well as P450 million in property dividends to the National Government during its 17th anniversary celebration. He pointed out that the BSP would remit another P4 billion in the next few months subject to the completion by the Commission on Audit (COA) of its review of the central bank’s 2009 financial statements.
The BSP chief said the central bank has declared P59. 5 billion worth of dividends in favor of the National Government since it was created in 1993 and paid more than P50 billion in taxes over the past 11 years. The central bank continued to remit dividends religiously despite the failure of the National Government to complete its P50-billion capital infusion to the BSP. July 11, 2010 |More banks extending business hours.
MANILA, Philippines – More banks have extended their regular operating hours in branches located in shopping malls, airports, university belts, MRT and LRT stations to service their clients, the Bangko Sentral ng Pilipinas (BSP) reported over the weekend. The BSP said more top tier bank branches, particularly those located closer to areas where there is heavy foot traffic continued to extend their banking hours to meet their client servicing requirements. Overall, this is a good indication of banks’ financial soundness, market sophistication and commitment to service not to mention, broadly in step with international best practices,” the BSP stated in its Status Report on the Philippine Financial System. The central bank said overseas banks such as RBC Royal Bank in Canada, TBC Bank in Germany, Bank of Hawaii, Bhuj Mercantile Bank of India, and Bank in Mongolia are few examples of banks already offering 24/7 full branch service to their banking clients. Banco de Oro universal bank of retail king and shopping mall magnate Henry Sy Sr. merged as the top bank last year in terms of assets with P815. 8 billion, deposit liabilities with P667. 6 billion, and loans with P469. 5 billion. The Metrobank Group of taipan George SK Ty emerged second in terms of assets with P691. 4 billion, deposit liabilities with P543. 5 billion, and loans with P339. 4 billion but was number one in terms of capital accounts with P70. 8 billion. Data from the BSP showed that the number of banking institutions fell further to 779 as of end-March this year from a year-ago level of 811 due to mergers and consolidations.
By banking classification, the BSP said banks consisted of 38 universal and commercial banks, 74 thrift banks, and 667 rural banks. However, the central bank reported that the the operating network including branches of the banking system increased by 188 to 8,663 as of the first quarter of the year from 8,475 during the same quarter last year. The BSP said the increase reflected mainly the the increase in the branches and agencies of commercial and rural banks. Data showed that the banking system’s total resources increased by 8. percent to P6. 4 trillion as of end-March from P5. 9 trillion as of end-March last year due mainly to the rise in loans and debt securities accounts. The BSP also reported that bank deposits increased by 8. 8 percent to P3. 4 trillion as of the first quarter of the year as savings deposits went up by 14. 9 percent while demand deposits or checking accounts rose by 16. 2 percent. Time deposits contracted by 4. 2 percent during the period. Earlier, BSP Deputy Governor Nestor Espenilla Jr. aid studies showed that there are still too many universal and commercial banks considering the size of the country’s economy. July 10 2010 Banks see no BSP rate hike By Erik Dela Cruz WITH average inflatP rate hike By Erik Dela Cruz WITH average inflation in the Philippines this year seen closer to the low end of the government’s target of 3. 5 percent to 5. 5 percent, the Bangko Sentral ng Pilipinas (BSP) may keep its key interest rate at a? record low of 4 percent for the rest of the year, according to? the top? economist? f Banco de Oro Unibank (BDO). The research group of Metropolitan Bank & Trust Co. (Metrobank), meanwhile, has lowered its 2010 inflation forecast this year to 4. 1 percent, from 4. 7 percent, after the rise in consumer prices eased further in June. “In light of the stable inflation environment, our expectation for BSP to hike interest rates has been pushed back to early next year,” BDO chief market strategist Jonathan Ravales said. The BSP holds its fifth policy-setting meeting this year on Thursday and is widely expected to keep rates unchanged.
The rates have been steady since July last year? after it delivered its last of a series of rate cuts totaling 200 basis points, aimed at shielding the domestic economy from the global recession. Headline inflation dropped further to an annual rate of 3. 9 percent in June from 4. 3 percent in May and averaged 4. 2 percent for the first half of the year. Core inflation, which excludes certain food and energy items to measure broad-based price pressures, also decreased to 3. 7 percent from 3. 8 percent in the previous month.?
He said the BSP will deliver possibly in the first quarter of 2011 its first rate hike since August 2008, and expects a one-percentage-point rate increase for all of next year, when average inflation is projected to ease further 3. 3 percent. Still, Ravales remains relatively conservative with his growth forecast of 3. 5 percent for gross domestic product this year, much lower than the government’s growth target of between 5 percent and 6 percent. The economy is projected to grow 5 percent in 2011, based on Ravales’ estimates, with remittances of overseas Filipinos—which have been driving domestic demand—seen rising to a record $19. 5 billion from this year’s estimate of $18. 35 billion. Ravelas is keeping his year-end peso exchange-rate forecast of 46 to the US dollar, which is a bit firmer compared with the end-2009 closing level of 46. 20. Pauline Revillas, research analyst at Metrobank, said the slower rise in consumer prices in June suggests that the economy could still accommodate an increase in domestic liquidity without fanning inflation. The contraction in the agriculture sector due to the dry spell, she noted, did not have much impact on food supply.
Any effects, she believed, would not be enough to cause a significant rise in consumer prices in the coming months. “The lower inflation figure [in June] also reflects the slightly diminished consumer confidence in the second quarter, as reported in the latest BSP consumer-confidence survey,” Revillas said in a research note. June 28, 2010 July 09, 2010 |Bangko Sentral ng Pilipinas likely to lower inflation forecast.
MANILA, Philippines – Monetary authorities are likely to lower the inflation forecast this year and next year after inflation eased surprisingly to a seven-month low in June, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said. Tetangco told reporters that the BSP would review on July 15 the latest inflation forecast for this year and next year. Tetangco said the BSP would review its latest inflation forecast given the new information to see whether or not there is a need to make adjustments in its latest policy stance. Last June 3, the central bank slashed its inflation forecast to 4. percent from 5. 1 percent for this year and to 3. 6 percent from 3. 7 percent for next year in light of the reduction of power costs, lower oil prices, steady commodity prices, moderate liquidity growth, and the continued strengthening of the peso against the dollar [pic] . The latest projections were within the targets of 3. 5 percent to 5. 5 percent this year and three percent to five percent for next year set by the BSP. The latest inflation forecast also took into consideration the stronger-than-expected gross domestic product (GDP) growth registered in the first quarter of the year.
The country’s GDP zoomed to its fastest pace in almost three years after expanding by 7. 3 percent in the first quarter of the year from only 0. 5 percent in the same quarter last ? year. Latest data from the National Statistics Office (NSO) showed the inflation rate eased to a seven-month low of 3. 9 percent in June form 4. 3 percent in May bringing the average inflation to 4. 2 percent for the first half of the year from five percent in the same period last year. Inflation last month was the lowest since the 2. 8 percent recorded in November last year.
Tetangco said the lower inflation gave monetary authorities enough elbow room to keep its key policy rates at record low during their meeting on July 15. “This inflation path therefore puts the full year inflation targets for 2010 and 2011 fairly safe, and thus provides BSP flexibility when we review the stance of monetary policy next week,” he added. However, the BSP chief pointed out that it was still early to rule out a possible policy rate hike within the year. The central bank’s Monetary Board has kept its policy rates nchanged for eight consecutive policy-setting meetings since July last year in the face of uncertain global economic prospects and with recovery proceeding at different stages and speeds in various parts of the world. It would be recalled that the Monetary Board decided to slash its key policy rates by 200 basis points between December of 2008 and July of 2009 as part of its accommodative stance to cushion the impact of the global economic meltdown. This brough the overnight borrowing rate at a record low of four percent and the overnight lending rate at six percent.