ING Philippines expects that the Bangko Sentral ng Pilipinas (BSP) may begin easing its key interest rate, currently at 6.5%, in the near term. This action could precede similar moves by the US Federal Reserve, according to experts at ING’s annual briefing in Manila.
The ING expectation is driven by the projected decline in rice prices by September, which is a significant contributor to the country’s inflation rate.
During the briefing, Rob Carnell, head of Research, ING Asia Pacific, noted that the Philippine peso has shown improvement every quarter, aligning with the performance of other Southeast Asian currencies. He also highlighted the peso’s sensitivity to shifts in the Japanese yen, which may influence its performance against the dollar-yen pair.
The Philippines has been a regional standout in attracting foreign direct investment (FDI), with Carnell suggesting that the country could leverage its position within the “China plus one” strategy. This strategy involves multinational companies diversifying their manufacturing bases to countries outside China. However, the Philippines faces challenges, including infrastructure constraints and geopolitical uncertainties, which may hinder its full potential in this role.
Oil prices
On the global front, ING forecasts a slowdown in the global growth trajectory to 5.4% by the third quarter of 2024. This deceleration may prompt central banks, including the US Federal Reserve, to consider rate cuts of up to 50 basis points, potentially by the September Federal Open Market Committee (FOMC) meeting. Inflation remains a persistent issue, adding complexity to monetary policy decisions.
Despite concerns of an impending recession, financial conditions have shown resilience, with little sign of stress in the markets. Oil prices are expected to peak in the current quarter, averaging $86 per barrel, before potentially trending downwards to $79 per barrel by 2025.
The briefing also covered the global Liquefied Natural Gas (LNG) market, which is anticipated to shift into a surplus due to significant capacity expansions in import and export terminals worldwide. For the Philippines, this shift comes as domestic gas supplies from the Malampaya field decline. The country is likely to import up to 8 billion cubic meters of LNG by 2030 to meet its growing energy needs. Several new LNG regasification terminals are expected to come online by 2025, reinforcing the nation’s energy infrastructure and supporting its energy transition efforts.