The Philippines: BSP sees monetary measures’ impact lagging; backs fiscal action

  • BANGKO SENTRAL ng Pilipinas (BSP) Governor Benjamin E. Diokno said fiscal measures could be more effective for revving up the recovery at the moment, with monetary easing undertaken during the pandemic still taking time to filter down the banking system.
  • Diokno said bank loan rates are still not easing with the industry reluctant to risk making any major lending push, though the effects of previous monetary actions are already apparent in the government securities market.
  • Diokno added that the BSP is nevertheless prepared to continue with an accommodative stance. “Even as BSP is prepared to implement additional policy measures, fiscal policy should play a more significant role in helping restore market confidence,” Diokno said.
  • “The slow adjustment in bank lending rates, together with bank risk aversion and weak loan demand, suggest that the impact of the BSP’s policy actions could take a longer time to materialize,” Diokno said.
  • “Bank lending rates have been slow to adjust, in part because of risk aversion and concerns on asset quality. For instance, in exchange for a relatively easy arrangement to secure a personal loan, banks appear to prefer higher lending rates to offset risk and related operational costs,” he added.

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