• Bangko Sentral ng Pilipinas (BSP) maintained its policy rate at 2.0% at its latest monetary policy meeting in March for the third meeting in a row

• Bank of Thailand (BOT) also kept its key policy rate unchanged for the seventh consecutive meeting at 0.5%.
• Singapore’s inflation rate rose for the third consecutive month by 0.7% yoy in February from 0.2% in January.

BOT Lowered 2021 GDP Growth Forecast to 3% From 3.2% Previously

Bangko Sentral ng Pilipinas (BSP) maintained its policy rate at 2.0% at its latest monetary policy meeting in March as it views the monetary policy settings are still appropriate to underpin efforts to support the country’s economic recovery. This was the third consecutive meeting where the interest rate was left unchanged since its last 25bps cut in November 2020. BSP guided that it expects inflation in 2021 to breach the upper end of its target range of 2%-4% due to upward inflationary pressure from supply-side constraints and higher global oil prices. Despite higher inflation, we continue to anticipate BSP to adopt a wait-and-see approach in the coming months as it will assess the inflation trend as well as the effectiveness of its vaccine roll out as the country is currently experiencing a new wave of Covid-19 cases. The resurgence in cases has resulted in ongoing containment measures in Metro Manila and nearby provinces until early April 2021.

Elsewhere, Bank of Thailand (BOT) also kept its key policy rate unchanged for the seventh consecutive meeting at 0.5% in the March monetary policy meeting. BOT guided that its decision to maintain the policy rate was to support economic recovery which continues to be highly uncertain. Although the Thai economy is expected to recover, BOT was cautious over the uneven recovery across sectors especially the tourism sector. Due to lower tourist arrivals and the negative impact of a new wave of the outbreak, BOT lowered its GDP growth projection to 3% in 2021 compared to its previous forecast of 3.2%. As headline inflation remains below BOT’s inflation rate target range of between 1.0-3.0% (1.4% in February) and with an anticipated pickup in growth amid the rollout of vaccines, we do not expect further rate cuts by BOT for the time being. With the policy rate at a low of 0.5%, we expect Thailand will likely rely more on fiscal policy to support the country’s economic recovery.

Separately, Singapore’s inflation rate rose for the third consecutive month by 0.7% yoy in February from 0.2% in January, making this its fastest rate since January 2020. Similarly, core-inflation increased for the first time in a year by 0.2% yoy (-0.2% in January). Headline inflation during the month was lifted by higher cost of private transport amid a rise in car prices and a slower decline in petrol prices. In a joint statement, Monetary Authority of Singapore (MAS) and Ministry of Trade and Industry (MTI) guided that core-inflation is expected to be mildly positive in 2021 in range of 0-1% (-0.2% in 2020) amid higher oil prices and dissipating downward pressure from government subsidies introduced last year. As for headline inflation, it was guided that MAS will be reviewing its forecast range due to the recent sharperthan-expected rise in costs of non-core items. The new forecast will be released in the next MAS monetary policy meeting on 14th April 2021.

Source: Affin Hwang Research - 26 Mar 2021