Philippines: Economic team wields inflation tool kit

  • THE PHILIPPINE ECONOMY is ready to face headwinds from rising inflation and further depreciation of the PHP which have intensified in recent months, economic managers said on 18 Sep 18, saying the government has all the tools it needs to handle these “temporary” challenges.
  • Finance Secretary Carlos G. Dominguez III said that people should “take a long view of our situation as a country” when assessing the elevated inflation rate and the twin deficits consisting of current account and budget shortfalls.
  • With regard to typhoon Ompong, Dominguez said they are still waiting for the final report on typhoon damage but said the government can tap a loan facility with the World Bank to deal with damage caused by Ompong.
  • A senior central bank official signalled a fourth hike in benchmark interest rates in 2018, as monetary policy makers boost efforts to tame the nearly decade-high inflation and support the local currency.
  • “We have to deliver a very strong rhetoric about having a strong follow through (policy action),” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo told the media briefing.
  • “Whether it’s 25 basis points or 50 basis points, that would be determined by the data that would come out between now and the 27 Sep 18 meeting of the Monetary Board.”
  • The central bank’s policy-making Monetary Board meets next on 27 Sep 18 after raising its benchmark rates at the past three meetings by a total of 100 basis points.
  • Consumer prices have been under pressure in part due to the weaker PHP, which is languishing near a 13-year-low against the USD.
  • At the same time, he noted that “there are signs that inflation has already peaked in Aug 18,” adding that “we continue to see inflation peaking in 3Q18 and for the rest of 2018 — that those non-monetary measures that the Economic Development Cluster committee decided on about two weeks ago will provide some support to the decline of inflation moving forward,” the BSP official also said during a press conference held before the briefing.
  • Guinigundo added that based on initial estimates, the damage inflicted by Ompong is confined to certain areas and has no widespread effect to the economy.
  • Shortly after the Aug 18 inflation data was reported, economic managers submitted a draft executive order (EOs) for President Rodrigo R. Duterte’s consideration that details immediate and medium-term responses to surging prices of basic goods. These moves are designed to increase the supply of fish, rice, vegetables and meat.
  • Economic managers want the removal of non-tariff barriers for these food items done before the end of Sep 18 to boost supply and drive down prices.
  • Socioeconomic Planning Secretary Ernesto M. Pernia said in the same briefing that the targeted 2022 poverty level can still be achieved despite current challenges.
  • Budget Secretary Benjamin E. Diokno meanwhile said that the current fiscal deficit is in line with the government’s thrust to increase its infrastructure investments.
  • Turning his attention to the PHP’s depreciation – by nearly 8% ytd – Mr. Guinigundo said its weakness should ease towards the end of 2018.
  • Malacañang itself is hopeful that the expected increase in cash remittances from overseas Filipino workers (OFWs) in the coming months will somehow break the fall of the PHP, and that steps being taken by the Executive branch will temper inflation, which has been hitting multi-year highs in 2018.

External Link: http://www.bworldonline.com/economic-team-wields-inflation-tool-kit/

External Link: https://www.philstar.com/business/2018/09/19/1852655/inflation-seen-ease-fourth-quarter-2018-despite-ompong-impact

19-Sep-2018


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