More RRR cuts in the offing

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    Another 100 basis point reduction in banks’ reserve requirement ratio (RRR) will take effect by November as the Bangko Sentral ng Pilipinas (BSP) works on increasing financial liquidity in the economy.

    Citing the country’s inflationary environment as a caveat, BSP Governor Benjamin Diokno said the central bank is fixed on cutting the reserve requirement to single digit until his term expires a little over two years from now.

    “Right now, it’s 16 (percent), so I still have two and a half years from January,” Diokno said at the sidelines of 12th Asian Bond Markets Summit Forum in Taguig City yesterday.
    But he noted this depends on the inflation dynamics, adding the central Bank could go for a 50 bps reduction in the RRR every quarter until his term expires.

    Last week, the BSP reported that inflation in September was at 0.9 percent.

    Carlos Dominguez III, secretary of the Department of Finance (DOF), meanwhile reiterated the need to rationalize the investments incentives the government gives to businesses in order to further fix the country’s balance sheet, while denying it will result to the abolition of agencies like the Philippine Economic Zone Authority.

    “What’s going to happen is that there will be a review; a body that’s going to review all of the fiscal incentives granted by all the different agencies, that’s all,” he said.

    “We will review essentially all the incentives,” he added.

    In a statement, the DOF said a “three-pronged strategy” will drive growth. This strategy is anchored on: bolstering the Philippines’ macroeconomic strength through prudent fiscal management and stable monetary policy, accelerating spending on infrastructure modernization and human capital development, and implementing the remaining packages of the Comprehensive Tax Reform Program and other bold reforms that will benefit all law-abiding Filipinos and businesses.”

    “We are doing the things we need to do. We are optimistic the growth momentum will be sustained beyond the medium term. We seek to make our market more competitive and our economy more inclusive,” the DOF said, quoting Dominguez’s speech at the forum.

    The DOF said the trade tensions between the United States and China, a potentially chaotic Brexit, and the recent attacks on two important Saudi oil refineries have all contributed to the uncertainties plaguing economies across the globe.

    “The Philippine economy has been challenged by slower global growth. The Asian Development Bank recently cut our 2019 growth forecast to 6 percent from 6.2 percent.

    But despite these headwinds, the Philippines’ economy will still be among the fastest-growing in the world,” the DOF said.

    “We will do our utmost to continue on this positive path via a three-fold strategy. First, we will continue to bolster our macroeconomic strength through prudent fiscal management and stable monetary policy. Second, we will focus our accelerated spending program on infrastructure and our people–two investment areas that will provide the highest returns in the short-run and well into the future. Third, our approach is further powered by game-changing reforms that will benefit all law-abiding Filipinos and businesses,” it added, quoting Dominguez.