MANILA, Philippines - Monetary authorities are likely to keep interest rates at current levels amid the continued strong dollar remittance inflows, global banking giant HSBC said in a report.
“The BSP (Bangko Sentral ng Pilipinas) is unlikely to cut rates at its first meeting of the year. Even if inflows are strong and monetary officials are displeased, other administrative measures will likely be considered before the BSP cuts rates. Therefore, we expect rates to stay on hold at 3.5 percent,†it said.
This year, HSBC said remittance inflows from overseas Filipino workers would sustain its growth momentum.
“For 2013, we expect steady inflows of remittances to continue to support consumption in the Philippines. In fact, with fiscal easing in Japan and data pointing to improved domestic demand in the US, remittance growth could surprise on the upside,†it said.
“With global conditions likely to improve, backed by a China recovery, we expect remittances to be robust in 2013,†HSBC added.
The strong inflows, coupled with supportive fiscal policy, will shore up domestic demand to buttress growth, it noted.
Remittances rose 7.6 percent to $1.9 billion in November, which translates to $19.4 billion total for 11 months in 2012, an increase of six percent.
For the Philippines’ consumption-driven economy, the above-expectation inflow of remittances bodes well, HSBC said.
“Looking ahead, we expect inflows in December to accelerate due to improved economic conditions in host countries,†it said.
Over a longer horizon, HSBC noted that factors such as aging in the developed world would expand employment opportunities for Filipino health workers, engineers and domestic workers.
In addition to remittances, which will provide a steady source for consumption, fiscal spending can be expected to add another push to shore up domestic demand. The state’s annual budget this year shows a 10.5-percent increase allotted for expenditures.