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BSP rate hikes are expected to begin in H1 2022, according to economists.

Following stronger-than-expected domestic growth in the third quarter of 2021, an economist predicts a raise in the Bangko Sentral ng Pilipinas (BSP) key rates in the first half of 2022.

The Philippine Statistics Authority (PSA) announced on Tuesday that the economy expanded by 7.1 percent in the three months ended September, up from -11.6 percent a year ago but slower than the previous quarter’s 12 percent.

On a quarterly basis, growth increased by 3.8 percent, owing mostly to a 6.6 percent rise in the services sector.

“Upbeat growth illustrates that growth is feasible even during lockdowns,” remarked ING Bank Manila senior economist Nicholas Mapa in a Tweet.

“Faster growth may allow @GovBenDiokno (BSP Governor Benjamin Diokno) to adjust rates in the first half of 2022,” he continued.

Due to another rise in coronavirus disease 2019 (Covid-19) infections caused by the Delta type, Metro Manila, which accounts for around 70% of the economy’s annual production, was placed under the toughest quarantine restriction, the enhanced community quarantine, from Aug. 6 to 20, 2021.

Until September 7, the movement restriction was reduced to modified ECQ (MECQ), allowing more people to leave their homes and contribute to economic growth.

The pandemic caused a 9.4% collapse of the domestic economy in 2020.

With the pandemic expected to hit the economy in the first quarter of 2020, monetary officials agreed to reduce the BSP’s key policy rates by 200 basis points to help assure continued economic activity.

Diokno pledged to maintain the accommodative policy stance for as long as it is needed, noting that the economic recovery is still weak.

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