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THE
negative interest rate regime has started to worry the
Bangko Sentral ng Pilipinas, which said on Tuesday this
cannot be allowed to persist indefinitely.
This is
when domestic interest rates are so low that people
would rather borrow in pesos and make foreign- or
dollar-denominated placements to take advantage of the
latter’s higher returns.
“A
negative real interest rate is not sustainable if it
persists for an extended period,” BSP governor Amando
Tetangco Jr. said at the sidelines of an economic
briefing he and his colleagues at the economic cluster
hosted at the Makati Shangri-la Hotel.
According to Tetangco, the real interest rate structure
first turned negative in the second half of last year.
But
analysts said the only reason people do not borrow in
droves in the local currency for purposes of investing
them abroad is because the appreciation of the peso is
wider than the interest differential.
That is,
a dollar investment at this point pays much less than
the 8-percent gain one would have realized by betting on
the strength of the local currency at the end of 2006,
for example.
But
Tetangco was confident banks will increasingly be in a
position to lend even in a low-interest-rate regime as
the industry succeeds in cleaning up its asset base and
achieves greater liquidity.
The
low-inflation environment should also help, he added.
“On the
demand side, we expect higher credit demand as low
inflation and high liquidity allow investors to plan
ahead better,” Tetangco said.
He told
reporters the early signs had been felt in the property
sector where prices have started to pick up and in the
automotive industry where increased car loan takeouts
were noted. |
