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Philippine Finance Secretary Ralph Recto has indicated that while the central bank will continue to implement interest rate cuts this year, the pace may be slower compared to 2024. This cautious approach is attributed to rising geopolitical tensions and uncertainties surrounding U.S. economic policies.
Key Takeaways
- Interest rate cuts in the Philippines may be fewer and more spaced out in 2025.
- The government plans to raise $3.5 billion through foreign bond sales this year.
- Global risks, particularly from U.S. tariffs and inflation, could impact local economic policies.
Slower Rate Cuts Anticipated
During a recent interview at the World Economic Forum in Davos, Recto stated that the Philippine central bank is likely to reduce interest rates by a total of 50 to 75 basis points this year. He emphasized that these cuts would be staggered, potentially occurring at intervals of 25 basis points per semester.
The finance chief highlighted that the uncertainty surrounding U.S. tariffs and inflation could hinder the extent of rate reductions. He noted that while the Philippines may not be directly affected by U.S. tariffs, the global economic landscape could see increased prices, which would complicate local monetary policy.
Government’s Foreign Bond Sale Plans
The Philippine government is preparing to return to the global debt market in the first half of 2025 to initiate its planned $3.5 billion foreign bond sale. Recto mentioned that discussions are ongoing with eight banks to facilitate this debt issuance, which will primarily be denominated in dollars.
This move is crucial as the country faces upcoming debt obligations, including $1.5 billion in dollar bonds due in March and €785 million in euro-denominated debt due in April. Last year, the Philippines successfully raised approximately $4.5 billion through international bond sales.
Economic Growth Projections
Despite the global uncertainties, Recto remains optimistic about the Philippine economy, projecting a growth rate of at least 6% for the year. He attributes this resilience to robust household consumption and strong remittances from overseas workers, which help maintain liquidity in the domestic market.
The finance secretary also commented on the current state of the Philippine peso, stating that its performance is acceptable and in line with other currencies affected by a strong dollar. He reassured that authorities would only intervene in the currency market during periods of volatility.
Conclusion
As the Philippines navigates through a complex global economic environment, the cautious stance on interest rate cuts reflects a broader strategy to balance domestic growth with external risks. The government’s proactive approach in managing foreign debt and maintaining economic stability will be critical in the coming months as it seeks to foster a resilient economic landscape amidst global uncertainties.
Sources
- Philippine Finance Chief Sees Slower Rate Cuts on Global Risks, Yahoo Finance.