ANZR: More monetary easing to lick  pandemic

March 31, 2020

ANZ Research forecasts more policy easing from the Bangko Sentral to help address the economic impact of the coronavirus disease 2019.

This, as the economic and financial markets research arm of Melbourne-headquartered Australia and New Zealand Banking Group Ltd. sees a big drop in the Philippine economic growth this year to only 1.2 percent because of the impact of the global pandemic.

This growth projection is way lower than the 5.9-percent output of the domestic economy last year and the government’s 6.5-percent to 7.5-percent target for this year.

With the need to finance programs to address the economic impact of Covid-19 on the domestic economy, the BSP’s policy-making Monetary Board has so far cut by 75 basis points the BSP’s key policy rates, allowed the purchase of as much as P300 billion worth of government securities with a maximum repayment period of six months, cut universal and commercial bank’s  reserve requirement ratio by 200 basis points effective March 20, 2020 to boost domestic liquidity by around P180 billion, and advanced the remittance of P20 billion worth of dividends to the national government for this year.

The report said fiscal and monetary accommodation are set to become more aggressive, citing similar decisions overseas.

“We are of the view that the spectrum of monetary policy will be widened to credit guarantees on lending to impacted sectors and greater regulatory forbearance on non-performing assets,” it said, adding “the availability of credit is becoming important than its price in our view”.

The report also believes that the amount of fiscal stimulus announced by the government to date is not enough to address the needs of the present situation.

The government has announced an initial P27.1-billion stimulus program to be disbursed to the affected sectors, and more are being collated especially since Congress has approved a measure that gives President Duterte emergency powers to realign the budget to come up with funds for Covid-19 measures.

“While welcome, these measures will in our view, not be able to offset the above discussed headwinds,” it added.