Philippines overnight borrowing rate hits record low 3.5%

A total of 100bps were cut this year.

According to DBS, further monetary easing does not appear likely this week after a cumulative 100bps worth of rate cuts this year, taking the overnight borrowing rate (OBR) to a record low of 3.50%.

Here's more from DBS:

This was possible as inflation stayed benign through 2012. However, given the robust economic growth momentum in recent quarters(growth reached 6.5% YoY in the first three quarters of 2012), price pressures will likely build.

We expect an uptick in average inflation to 4.1% in 2013, up from 3.3% in 2012. In the near term, growth/inflation dynamics remain very favorable.

Loan growth has also not been excessive and appears to be stabilizing at around 15%. Accordingly, monetary policy is going to stay accommodative and a 25bps rate hike is penciled in only in 4Q13 (pushed back from 3Q13 previously).

In the immediate term, the central bank (BSP) appears to be more concerned about dealing with strong inflows that has resulted in a strengthening peso and very low interbank rates.

The external sector proved to be surprisingly resilient despite slowing growth in the major economies through 2012. Much of this can be attributed to the successful diversification of exports over the last 1-2 years.

Previously, electronics made up more than 50% of total outbound shipments. This has changed. While electronics exports have largely gone sideways since early 2012, non-electronics manufactures (including machinery & transport equipment and miscellaneous manufactured articles) have been able to take up the slack.

Over the past six months, the value of non-electronics manufactures exports actually exceeded electronics manufactures for four months, a phenomenon that was not seen before.

As a result, goods export in nominal terms is still on track to register healthy growth of 9.7%. While there have been no clear signs of a turnaround in the electronics sector, non-electronics manufactures should continue to support exports. For October, we expect export growth to reach 3.5% YoY.