Philippines Slashes Rate Again as Graft Claims Cloud Outlook

The Philippine central bank cut its key policy rate for a fourth straight time on Thursday in a bid to bolster economic growth.

Bangko Sentral ng Pilipinas lowered its benchmark rate by 25 basis points to 4.75% and left the door open to further easing, and warned that corruption allegations surrounding public spending had eroded investor confidence and created concern over the economic fallout from a widening graft probe.

“The Monetary Board noted that the outlook for domestic economic growth has weakened. This outlook reflects, in part, the impact on business confidence of governance concerns about public infrastructure spending,” the BSP said in a statement.

ALSO SEE: TSMC Sees 30% Revenue Rise in Third Quarter Amid AI Boom

The peso slid to 58.165 per dollar, while the main stock index, already trading in the red, lost a few more points after the rate cut, which surprised many analysts.

Graft claims tied to flood control projects

Authorities are investigating corruption allegations tied to infrastructure projects, particularly flawed flood-control facilities, in a scandal that has shocked an already graft-weary nation.

The probe has implicated several government officials and lawmakers, raising concerns about the integrity of public spending and further denting investor sentiment.

“We need a credible resolution to this issue,” Governor Eli Remolona told a press conference.

Central bank Deputy Governor Zeno Abenoja said there was a “greater probability” the government would miss this year’s 5.5% to 6.5% growth target.

“There could be some adjustments later on,” Abenoja said, “but we want to better understand how the national government and the business community respond as this crisis evolves.”

Remolona said another rate cut was possible at the BSP’s final policy meeting in December and did not rule out further easing next year, backtracking on earlier guidance that the current cycle was nearing its end.

“The Monetary Board sees scope for a more accommodative monetary policy stance. The favourable inflation outlook and moderating domestic demand provide room to further support economic activity,” the BSP said.

The decision comes after inflation rose to a six-month high of 1.7% in September, but was still below the 2% to 4% target range for the year.