Philippine central bank keeps its viselike grip on monetary policy

GDP growth momentum remains strong.

Unlike other countries in the region, the Philippines seems unlikely to loosen its monetary policy anytime soon despite falling inflation.

According to a report by DBS, the Philippines will keep its monetary policy stable because GDP growth momentum remains supported by robust domestic demand.

“Last week’s policy meeting reemphasised that Bangko Sentral ng Pilipinas is unlikely to loosen its monetary policy stance anytime soon. While CPI inflation is set to miss the official target this year, GDP growth momentum remains pretty strong. 3Q15 GDP data next week is likely to show that growth has returned to the 6% territory in the period,” DBS said.

Domestic consumption is supported by generous fiscal spending, which is finally back to double-digit territory after two consecutive years of seeing 5% growth.

“The government plays quite a significant role on this front. Fiscal spending accelerated in 3Q15, growing close to 20% (YoY), bringing the year-to-date growth to 12%,” said the report.