The Bangko Sentral ng Pilipinas will not hesitate to tweak the benchmark interest rates if the April inflation figure exceeds expectations, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said Thursday.
Guinigundo said all pertinent data would be considered by the Monetary Board in its policy meeting next week. He said the members of the board would particularly watch the April inflation data that would be released by the Philippine Statistics Authority on May 4.
“Let us see on May 4 what is going to come up of PSA,” Guinigundo said at the sidelines of 51st Annual Meeting of the Asian Development Bank in Mandaluyong City.
“If it [inflation rate] is higher than 4.3 percent, then it means something. If it is lower than 4.3 percent, 4.2, 4.1, then we have to reassess all the numbers. You know our position here. We keep on monitoring those numbers. We don’t just focus on what we see today, but you have to look at it at a medium-term perspective especially with respect to the medium term,” Guinigundo said.
He said the Bangko Sentral would also consider other factors. “But again you have the discipline of inflation targeting. You just don’t move the policy rate without considering all of the factors that we normally consider in the context of inflation targeting. We look at both price and monetary conditions. We look at the trend in output,” he said.
Inflation in the first three months averaged 3.8 percent based on the new 2012 consumer price index, still within the inflation target range of 2 percent to 4 percent this year.
The Bangko Sentral said that inflation in April likely accelerated to as high as 4.7 percent from 4.3 percent in March, on the back of higher oil prices and power rates.
Interest rates remain at 3 percent for overnight borrowing, 3.5 percent for overnight lending and 2.5 percent for deposits.
Meanwhile, the Asean+3 Macroeconomic Research Office said the Philippine economy was expected to grow 6.8 percent this year, one of the fastest in the region, driven by the government’s higher fiscal spending and the recovery of exports.
The 2018 projection was faster than the actual economic expansion of 6.6 percent last year. The Philippines is forecast to outperform China (6.6 percent), Indonesia (5.2 percent), Japan (1.3 percent), Malaysia (5.3 percent), Singapore (3 percent), Thailand (3.9 percent) and Vietnam (6.6 percent). Only Myanmar is seen to grow faster at 7 percent this year.
“The Philippines economy is forecast to grow by 6.8 percent in 2018 as exports are expected to remain buoyant while hurdles to budget execution are gradually being overcome,” AMRO said.
The interagency Development Budget Coordination Committee last week kept the annual gross domestic product growth target of 7 percent to 8 percent from 2018 to 2022.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said the government was doing the right thing at the moment in terms of investing heavily on development and infrastructure projects to boost the economy.
“The Philippines is a young and developing economy so we are just catching up… We are in a catchup mode… We have infrastructure to build. We have a population that is young and a growing economy,” Espenilla said.
“I think the opportunity for the Philippines is still in front of us… and there is the question of doing the right thing. The government is correct in focusing on building infrastructure as well as investing in people’s health and education,” Espenilla said.