Economic officials confirmed that the persisting elevated interest rates will affect the Philippine government’s debt servicing program.
The Financial Stability Coordination Council (FSCC) which held its 39th Executive Committee meeting to review offshore market developments said the level of global interest rates is one such factor that could affect the stability of the country’s financial system.
The council recognized that global indicators of market volatility remained low, but underscored the volatility in global oil prices.
US inflation has come down but remains stubbornly high by the Fed’s own characterization. This suggests a high-for-long policy rate environment, which will likely affect the global economy. Ggeo-political risks have been protracted and, in recent cases, escalated, the council said.
It said economic growth in the Philippines remained strong and among the highest in the world. Latest data suggest that the full-year inflation is unlikely to breach the upper end of the target range of 2 percent to 4 percent. These are reassuring indicators that allow the Philippines greater control over its macro-financial path forward, it said.
“We find comfort in the broad indications of stability and their effects on the economy. These are issues that the FSCC will continue to monitor,” said FSCC chairman and Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr.
He said “the volatility in the price and supply of energy-related products can affect economic activity, while a high-for-long global interest rate situation will weigh on debt servicing in general.”
“These are issues that the FSCC will closely monitor and may address in due course, if warranted,” he said.
The FSCC is an inter-agency council composed of the BSP, the Department of Finance, the Insurance Commission, the Philippine Deposit Insurance Corp. and the Securities and Exchange Commission as member institutions.