Philippines Cuts Special Deposit Account Rate, Holds Benchmark

The Philippines cut the rate it pays on special deposit accounts for a third time this year, boosting efforts to curb capital inflows and avert asset bubbles.

Bangko Sentral ng Pilipinas lowered the rate on SDAs to 2 percent effective immediately, according to a statement in Manila today. The decision was predicted by 12 of 16 economists surveyed by Bloomberg News. It kept the rate it pays lenders for overnight deposits at a record-low 3.5 percent, as forecast by all 19 economists surveyed.

The Philippines, which won its first investment-grade ranking from Fitch Ratings last month, is seeking to slow a surge in capital inflows that has boosted property prices and lifted stocks to a record this week. Policy easing in developed nations is adding to pressure on inflation and asset prices in Asia’s emerging economies, the World Bank said this month.

“Capital inflows are a key concern,” said Michael Wan, a Singapore-based economist at Credit Suisse Group AG. “Money is still flowing in, and with the rating upgrade, more investors will try to take opportunity of the growth story. With inflation manageable, what better time for BSP to cut SDA rates than now.”

Bangko Sentral last week relaxed curbs on dollar purchases to restrain the peso, doubling the amount of dollars residents can freely buy and broadening the range of approved outward investments to encourage outflows.

Philippine stock valuations surged to an all-time high of 20.4 times projected 12-month profits on April 22, or twice the MSCI Emerging Markets Index multiple, data compiled by Bloomberg show. The peso has declined about 0.7 percent against the U.S. dollar this year after trading at near a five-year high in March.

President Benigno Aquino is increasing spending to a record this year while seeking more than $17 billion of investments in highways and airports to spur annual growth to as much as 7 percent. Fitch upgraded the Philippines on March 27, citing moderate budget deficits and a “strong” policy-making framework among reasons, including efforts to manage capital inflows.

To contact the reporters on this story: Karl Lester M. Yap in Manila at; Max Estayo in Manila at

To contact the editor responsible for this story: Stephanie Phang in Singapore at

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