(Bloomberg) — The Philippine economy can grow as much as 7% this year, aided by interest-rate cuts that will support investment and consumption, according to Finance Secretary Ralph Recto who also brushed aside concerns over political stability.
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“We don’t see that happening. Zero,” Recto said in an interview with Bloomberg Television’s Haslinda Amin on Wednesday, when asked about the chances of the political situation unraveling after former leader Rodrigo Duterte’s arrest last week over his deadly drug war.
The finance chief, who sits in the seven-member policymaking board of the Bangko Sentral ng Pilipinas, said on the sidelines of the InvestPH 2025 forum in Manila that he expects a total of 50-75 basis points in rate cuts this year. There is room for the BSP to resume monetary easing at its next meeting on April 10, and that will help gross domestic product expand by at least 6% this year.
The Philippines, one of Asia’s growth stars, could see its economic momentum slow amid elevated borrowing costs, sluggish stock market and mounting political risks. The investment banking unit of the nation’s biggest lender BDO Unibank Inc. said shortly after Duterte’s arrest that political noise is adding to headwinds in a market already grappling with global uncertainties.
Bright spots remain. Inflation, which slowed sharply in February and sits at the low end of the central bank’s 2% to 4% target, remains under control while the peso has been relatively stable, according to Recto.
The Philippine currency has risen 1.6% in the past month, the best performance among Asia’s most-active currencies. The Philippine Stock Exchange is expecting three big IPOs this year to energize lackluster equities trading, according to bourse President Ramon Monzon.
The stock market will unlikely be impacted by the political noise, Monzon said, adding that the benchmark index has actually risen since the date of Duterte’s arrest. “It’s just political noise and a lot of fake news, of social media. I think the business community is moving on.”
Flexibility
As for the central bank, it sees inflation staying within target in the next two years, giving monetary authorities “flexibility” to “pursue dialing down policy tightness,” BSP Assistant Governor Zeno Abenoja said at the forum.
The government aims to raise about 100 billion pesos ($1.75 billion) from the sale of state assets, including a hydroelectric power plant, Recto said.
The finance chief also said there is “very minimal left” of what the government needs to raise from the international bond market for this year to help fund the budget.
The Philippines, which has investment-grade sovereign credit ratings, sold $3.3 billion of dollar and euro bonds in January, raising bulk of its overseas funding requirement for 2025 as it looks to fund a budget deficit of about 1.54 trillion pesos this year, equivalent to 5.3% of GDP.
InvestPH 2025 is organized by the Philippine Stock Exchange and co-hosted by Bloomberg LP, the parent company of Bloomberg News.
–With assistance from Clarissa Batino, Cecilia Yap, Andreo Calonzo, Neil Jerome Morales and Cliff Venzon.
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