The Philippines has one of the lowest lending rates in the Asian region, thus bolstering expectations by authorities of stronger domestic economic activity. Estimates by the BSP show that the Philippines’ real lending rate (i.e., lending rate adjusted for inflation) of 4.95 percent was the third lowest in a sample of 10 Asian countries after South Korea and Japan, which had real rates of 4.1 percent and 3.0 percent, respectively. By contrast, the highest rates were recorded for Hong Kong (8.2 percent) and Taiwan (7.8 percent), a result partly of negative inflation rates.
*As of 15 July 2002
The data reflect the current low-interest rate environment in the Philippines resulting from ample liquidity conditions following the substantial monetary easing undertaken by the BSP over the past year. BSP Governor Rafael B. Buenaventura said that this implies relatively lower cost of capital for business, which should augur well for economic activity in the near term. Together with the benign outlook for inflation, the present level of real interest rates is expected to continue and provide a supportive macroeconomic environment that would encourage stronger domestic consumption and investment activity over the coming months. Such a prospect bodes well for the government’s GNP growth targets of 4.5-5.0 percent and 5.5-6.0 percent for 2002 and 2003, respectively.