Weekly Commentary - Philippine Central Bank may cut interest rate
After structural reform, The Philippines is one of the fastest-growing economies in Asia. After posting 6.8% growth in 2012, Philippine economy grew 7.8% in the first quarter this year, and it is faster than China (7.7%) and India (6%). The Philippines’s success is because President Benigno Aquino III’s economic reform. Since 2010, the president have introduced a lot of reform, including against corruption, rising alcohol tax and new capital construction project.
Philippine Central Bank implies cutting interest rate further to boost economy growth, as many emerging markets face the dual challenge of slowing growth and high inflation. By comparing to other developing countries, Philippine economic growth is still at high rate, and its inflation is benign. Central bank’s action aims to buffer external shocks such as the tapering bond-buying, the Eurozone debt crisis and the slowdown in China.
We view Philippines positive since its fast growth and its public policy. If central Bank lowers interest rate, it will increase money supply in market, and then domestic stocks may move upward. We will keep looking for Philippine government policy and adjust our portfolio.
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