BSP should guard vs asset bubbles — House think tank

The Bangko Sentral ng Pilipinas should continue monitoring asset price movements to guard against asset bubbles forming, the Congressional Policy and Budget Research Department (CPBRD) of the House of Representatives said in a recent report. “[P]rolonged period of low interest rates could trigger asset price bubbles, which could eventually burst and would have larger negative repercussions on the country’s financial system,” the CPBRD said in its report “Confronting the Challenges of the Eurozone Debt Crisis.” However, the department noted that the central bank has already enacted preemptive measures against potential asset price bubbles, such as lowering the statutory limit of banks' exposure to real estate from 30 percent of their total loan portfolio to only 20 percent. The central bank also broadened the definition of “real estate exposure” to include activities such as investing in bonds and stocks issued by property firms and granting loans to developers to finance low-cost housing development. In its report, the CBPRD also pointed out that the Philippines is still vulnerable to external factors such as the Eurozone crisis despite strong GDP growth in the third quarter, with “key spillover channels” such as trade, remittances and capital flows being particularly exposed to external fluctuations. CPBRD also said the government should deal with “key bottlenecks” in its processes to speed up development. “Addressing key bottlenecks in project preparation and implementation, especially in key infrastructure projects—right of way acquisition, bidding process, selection of contractors—will boost domestic demand and help stimulate amid global economic slowdown,” it said. — BM, GMA News