MANILA - Rasing key borrowing rates and reducing the reserve requirement for banks at this time is "untimely" and would be counterproductive in fostering economic growth, Bangko Sentral Governor Benjamin Diokno said Monday.

The BSP's policy rate, used by banks to price loans, is currently at a record low of 2 percent while the reserve requirement for banks is at 12 percent.

"The economic recovery is at its early stage. It has to be nurtured not nipped at its bud. We need to sustain it and raising the interest rate at this time is not the right thing to do. That could be counterproductive," Diokno said.

"While I'm committed to reduce the RRR to single digit before the end of my term which is in 2023, cutting it now is untimely and unjustified," he added.

Diokno earlier said he would bring down the country's RRR, used to be among the highest in the region, to single-digit before the end of his term.

The BSP has shaved some 200 basis points (bps) in the reserve requirement in 2020, pumping more liquidity into the system.

• Bangko Sentral makes surprise rate cut as economic slump continues

"There’s still a lot of liquidity in the system. If there comes a time when the financial system needs more liquidity… that’s the time when we might consider an RR cut," Diokno said.

A strong economic recovery is foreseen in the second quarter but the 2-week lockdown could affect third-quarter economic growth, he said.

Socioeconomic Planning Secretary Karl Kendrick Chua said the estimated economic losses each week Metro Manila is in lockdown could be P150 billion higher than the previous estimate of P105 billion.

The 2-week lockdown imposed in Metro Manila from Aug. 6 to Aug. 20 could affect 600,000 workers and is likely to increase the number of poor by about 250,000, Chua said.

A new round of hard lockdown was imposed to contain the rising number of COVID-19 infections and the emergence of the new Delta variant.

Despite the headwinds, the economy could still grow "maybe around the target" of 6 percent, Diokno said. The GDP could grow by 7.7 percent in 2022 and 6.5 percent in 2023, he added.

• ECQ to cost Philippine economy P150 billion per week, says Chua
• Who are allowed to go out in ECQ areas?

Watch more in iWantv or TFC.tv