The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) said domestic demand conditions continue to be buoyant as the latest indicators point to firm growth prospects over the policy horizon, but warned of continued volatility in global financial markets.
“The Monetary Board observed that domestic demand conditions continue to be buoyant, supported by solid private household and capital spending, positive business sentiment, and adequate credit and domestic liquidity,” according to the highlights of its March 23 monetary policy meeting, released on Thursday.
The MB said the latest indicators of domestic demand continued to point to firm growth prospects over the policy horizon.
It noted that Philippine composite purchasing managers’ index remained firmly above the 50-point expansion threshold at 52.8 as of January.
The BSP’s policymaking body also mentioned that the latest results of the BSP’s Business
Expectations Survey (BES) indicated a broadly optimistic sentiment for the first and second quarters of 2016, notwithstanding concerns over the outlook for global growth, the impact of El Niño, and the outcome of the elections.
BES showed that business sentiment for the first three months of the year remained positive although it fell from a quarter ago.
The overall business confidence index (CI) fell to 41.9 percent for the January to March period from 51.3 percent in the fourth quarter of last year.
The outlook for the next three months, on the other hand, rose from the previous survey. With the CI at 49.6 percent from 43.9 percent, the central bank said it “suggests that economic growth could be higher for the next quarter.”
Meanwhile, the MB also noted that unemployment rate fell to 5.8 percent from 6.6 percent a year earlier “due to sustained job growth in the services and industry sectors.”
Nevertheless, it also recognized that uncertainty over economic growth prospects across the globe could continue to drive volatility in global financial markets in the months ahead.
This is despite the easing of financial market volatility on expectations that the United States Federal Reserve would delay further interest rate hikes.
“However, lingering uncertainty over the global growth outlook amid China’s growth rebalancing, divergent monetary policy settings among key jurisdictions, and lower commodity prices continued to weigh down on markets,” it said.
At its March 23 meeting, the MB left the BSP’s key policy rates unchanged at 4 percent for overnight borrowing and at 6 percent for overnight lending.