A party-list lawmaker has lauded the Bangko Sentral ng Pilipinas’ (BSP) recent move adopting a no-interest policy on banking reserve requirements.

At the same time, Ang Kasangga Rep. Teodorico “Ted” Haresco proposed to the BSP the possibility of lowering key interest rates by 25 basis points to mitigate peso appreciation.

Haresco said that a strong peso would also further dampen demand for Philippine exports “from Europe, as it is ravaged by the debt crisis, and the slow US economy.” 

He further warned that the country should prepare for the effects of an extended European economic downturn, which would also dampen the export-oriented Asia-pacific economies of Japan, China, India and Korea. 

“The prospects for global growth are seriously hampered by the crisis in Europe,” said Haresco. “As a consequence, this austere economic outlook may also limit our GDP (gross domestic product) growth to between 3-4%, at best.”

Besides this, he said that a strong peso reduces the effective purchasing power of OFW earnings. “It’s disheartening for the eight to 11 million heroes to see their purchasing power evaporate by some 25% per year, and in the face of constantly increasing gasoline and power costs.”

He added that while the BPO sector in the Philippines, which contributed about US$11 billion to the country’s GDP last year, is unfazed by US President Barack Obama’s announcement to withdraw benefits for US jobs located abroad, it was too early to predict the net effect this would have on the sector.

“But given the US 8.3% unemployment rate, it’s reasonable to assume that some jobs will be repatriated, to the possible detriment of the BPO sector here,” said Haresco.  

He reiterated that the solution is still Government spending, which would serve to “pump-prime” the economy by creating jobs and stimulating demand internally.

Haresco said that the initial release of over P150.1 billion for public infrastructure projects was a step to achieve the target of 5-6% GDP growth rate this year, but warned that the economy may “stall” if no sustained measures are taken for continued economic stimulation.

“The economy should take front stage,” he said.