BSP may cut rates by more than 25 bps due to COVID-19

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno indicated that an additional interest rate cut of more than 25 basis points (bps) is possible due to the global spread of COVID-19.

Diokno previously committed to a 50 bps rate reduction for the year, with the first 25 bps already implemented in February.

He mentioned that the BSP has sufficient monetary and fiscal space to manage the situation and would consider further rate reductions if the economic impact of COVID-19 deteriorates beyond initial forecasts.

The BSP is currently revisiting its economic impact assessments to account for the latest data and the escalating nature of the coronavirus situation.

Initial BSP estimates projected a potential 0.3 percentage point reduction in GDP growth for 2020 due to disruptions in the tourism and services sectors.

The BSP is also reviewing its earlier estimates on the impact on tourism direct gross value added (GVA), which could range from 1.4 to 5 percentage points in the first two quarters of the year.

Despite these emerging risks, Diokno remains positive that the economy will expand by six percent this year, although the government's target is 6.5-7.5% GDP growth.