Philippines central bank cuts rates as Q1 GDP growth falls

The Central Bank of the Philippines cut its key interest rate by 25 basis points to 4.5% today (May 9).

It announced its decision a few hours after the government released the country’s weakest first-quarter GDP growth in four years.

The central bank’s monetary board decided to reduce the overnight reverse repurchase (RRP) rate to 4.5%, effective on May 10, governor Benjamin Diokno said in a press conference.

The Philippine economy expanded 5.6% in the first three months of this year, the Philippine Statistics Authority (PSA) said on Thursday. The pace was slower than economists’ forecasts and lower than the 6.5% growth recorded in Q1 2018.

Some observers said the growth rate was reduced by a slowdown in government spending and the agriculture sector.

The country’s lawmakers initially refused to pass the government’s spending budget for 2019, before eventually doing so. Government expenditure slowed as a result, growing 7.4% in the first quarter, compared with 13.6% for the same period of 2018.

The Philippines became the second nation in Southeast Asia to ease monetary conditions this month, after Malaysia cut its policy rate by 25bp to 3% on May 7. The Malaysian central bank cited weak data from consumer inflation and purchasing managers’ indexes.