CEBU’s business leaders have lauded the stance of the Bangko Sentral ng Pilipinas (BSP) not to raise interest rates at the moment while the country is working on healing itself from the economic pains of the Covid-19 pandemic.
“The CCCI supports BSP Gov. Benjamin Diokno’s analysis that raising rates too early will cause more harm,” said CCCI president Felix Taguiam in a statement.
“CCCI underscores that we are still in the period of uncertainty where businesses are striving hard to survive, some are on their way to recovery, while some are still trying to figure out how to navigate this pandemic,” he added.
The CCCI president stressed that the the economic performance of Central Visayas last year declined by 9.9 percent.
“It was largely attributed to the onset of the Covid-19 pandemic and there is no guarantee when things will go back to normal and life will be easier again,” he said.
Steven Yu, president of the Mandaue Chamber of Commerce and Industry, agreed with CCCI, saying “interest rates should remain accommodative to support economic recovery.”
“Interest rates have to be kept low or it will be a perfect storm for the community,” Yu said.
If interest rates will increase, retailer Robert Go said this will “further exacerbate businesses’ funding requirements and interest expense.”
“Lower interest will help businesses float through the pandemic, and it should continue to be on a low environment if we are to save the economy and businesses. If we are to keep few jobs, then interest must be lowered further, especially that oil prices have shot up almost reaching the US$100 per barrel with inflation rate of almost 4.5 percent,” Go explained.
Harm to PH recovery
On Sunday, Diokno was quoted in a report as saying “tightening monetary policy too early may cause more harm to the Philippine economy’s recovery.”
The Monetary Board has kept its key interest rate at a record low of two percent in its last seven meetings, stressing that raising rates may be premature, considering that the country’s economic recovery is just starting to gain traction.
“Some central banks raised their rates because they fear inflation and they see their exchange rate deteriorating so fast as a result, so some of them have adjusted rates,” said Diokno, in a report.
In the Asia-Pacific, the Bank of Korea and New Zealand have already hiked interest rates, while the Monetary Authority of Singapore tightened monetary policy by raising the slope of its currency band.
Support mechanism
Instead of raising interest rates, CCCI said the country “needs more support mechanisms to communities especially in developing nations such as low bank borrowing rates and relaxation of banking application regulations and accounting rules.”
Businesses, according to Go, are still suffering and many companies have closed for good while small and medium enterprises are floating, either wanting to close or hoping to open. He said they encountered further losses in the third quarter due to the sudden shift to modified enhanced community quarantine.
“The loosening of operative capacity of establishments with our lower alert level will help soften the impact of inflationary pressures. We have to continue the vaccination efforts, attain herd immunity and practice minimum health protocols to maintain a loosened business capacity,” said Yu.
The BSP will hold two more policy review meetings this year, scheduled on Nov. 18 and Dec. 16. (KOC)