"Key interest rates will follow the pace set by the Fed which is eyeing a rate cut soon. But if the former National Treasurer Leonor Briones were still around, she would drop the interest rates to a low double digit or to a high single digit level," Philippine Veterans Bank (PVB) president and chief executive officer Ricardo A. Balbido Jr. said.
Balbido said government is keen on reducing interest rates to 8.5 percent to nine percent over the medium term.
"That will make the environment extremely conducive for investments," Balbido added.
Likewise, the PVB chief executive anticipates that the peso would stabilize "sooner than later" at 47 to 48 to the US dollar.
"Our currency is overly depreciated. And given the overall economic fundamentals, we should be at par or a peso or two (weaker) than the Thai baht."
However, he noted that the budget deficit has grown so big and this may keep the peso from catching up with the baht. The deficit reached P120 billion at the end of 2000, way beyond the original P62.5-billion target set early last year.
Balbido pointed out that peso dropped to an all-time low of P54 to the dollar due to the political crisis resulting in lack of investor confidence and not due to poor economic fundamentals. The country’s exports registered positive growth while its international reserves remained stable.
But with the promise of positive developments resulting from the change in administration the peso is bound to stabilize at 47 to 48 to a dollar in the near future, regardless of how much it lost during the crisis period, Balbido said.
The baht is currently valued at 42 to 43 to the dollar. Traditionally, the peso is valued lower by one to two pesos.
Balbido however, cautioned against impatience by the population while urging swift action by the new dispensation.
"The newly-installed administration has to set the environment that would encourage the market to start committing themselves to the Philippine economy. That would mean among others lower rates, and greater transparency in governance," he said.