MANILA – Hongkong and Shanghai Banking Corp. projects a lower expansion for inflows from Filipinos abroad this year and considers this as a reason for monetary officials to further implement an easing bias on their policy stance in March.
In a research note penned by its economist Trinh Nguyen, HSBC eyes a five percent growth for remittances for 2012, lower than the 7.2 percent it posted in 2011.
It cited that the robust growth of remittances last year, which was higher than central bank’s seven percent projection, was an important factor for the economy as this continued to drive private consumption.
The strong growth of remittances, it said, offset the nearly seven percent drop in exports, which continued to get hurt by the negative external environment.
The Bangko Sentral ng Pilipinas recently reported that remittances in 2011 totaled to $20.1 billion from year-ago’s $18.76 billion. On the other hand, year-on-year growth of remittances last December alone slowed to 6.2 percent from month-ago’s 10.6 percent.
“We expect remittances to stay strong in 2012, albeit expanding at a slower pace of five percent,” the research note said.
It, however, noted that the slower growth of inflows from overseas Filipinos suggests “that the BSP may lean towards an easing bias to support domestic demand when they meet in March.”
It also cited that since inflation continues to decelerate, with last January’s level at 3.9 percent from month-ago’s 4.2 percent (based on the 2006 series), “the outlook for inflation for the rest of this year is also favorable, with price pressures expected to stay within the three-five percent target through 2012.”
“Faced with decelerating price pressures, slowing remittances and weakening exports, the BSP may be swayed towards more of an easing bias when they meet in March,” the research note said.
It also said that although remittances posted a strong growth last year the on-going export collapse “will motivate the BSP to do what it can to support spending.”
“We retain our view of a rate pause at their next meeting in March, but chances of an easing bias being adopted are rising,” it said.
Central bank’s policy-making Monetary Board slashed by 25 basis points the BSP’s policy rates last January, the first since July 2009 and after maintaining it for the past six consecutive policy meetings, to support expansion of the domestic economy.
To date, central bank’s overnight borrowing rate is at 4.25 percent and the overnight lending rate is at 6.25 percent.*PNA