'Asia has policy space to boost economic activity'

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) believes that emerging market economies in the Asia Pacific Region including the Philippines have policy space to stimulate economic activity amid the lingering global weakness brought about by the uncertainties in advanced economies led by the US as well as the debt crisis in Europe.

BSP Governor Amando M. Tetangco Jr. said in his keynote address during the 20th Economic Journalists Association of the Philippines (EJAP) Business Journalism Awards that Asian emerging market economies unlike their counterparts in advanced economies.

“Unlike their counterparts in advanced economies, Asian emerging market economies have room for deficit spending and for accommodative monetary policies that should help to stimulate economic activity,” Tetangco said.

Recently, the Aquino administration launched a P72 billion stimulus package for infrastructure and social services particularly to help reconstruct the damages caused by typhoons Pedring and Quiel.

The BSP chief added that inflationary pressures have eased due to stable oil and food prices in the world market.

“In addition, the lingering global weakness has dampened commodity prices. Hence, pressures to inflation have eased, allowing monetary policy to focus on growth,” Tetangco explained.

The BSP kept its interest rates steady for the fourth consecutive policy rate-setting meeting held last Oct. 20.

The BSP raised interest rates by 25 basis points last March 24 and by another 25 basis points last May 5 as a preemptive move to keep inflation expectations well anchored amid the escalating price of oil in the world market.

The policy rate setting body, however, kept interest rates steady last June 16 and July 28 but raised the reserve requirement ratio for banks by a cumulative 200 basis points to 21 percent from 19 percent to siphon off P70 billion from the financial system and curb additional inflationary pressures arising from excess liquidity brought about by strong inflow of foreign capital.

During the meeting, monetary authorities retained its inflation forecast for this year at 4.46 percent but lowered the forecasts for 2012 to 3.05 percent from 3.4 percent and for 2013 to three percent from 3.23 percent due to the expected slowdown in global economic growth and the lower forecasts for petroleum prices to $94.5 per barrel from $104.75 per barrel for 2012 and to $92.82 per barrel instead of $102 per barrel for 2013.

Latest data from the National Statistics Office (NSO) showed that inflation averaged 4.3 percent in the first nine months of the year from 4.1 percent in the same period last year as consumer prices slightly kicked up to 4.6 percent in September from 4.3 percent in August due to higher water and power rates as well as rising fuel prices.

Tetangco said the International Monetary Fund (IMF) through its latest World Economic Outlook (WEO) slashed global output growth to four percent in both 2011 and 2012 instead of 4.3 percent for 2011 and 4.5 percent for 2012.

“Despite the slowing global activity due mainly to downdrafts from advanced economies, the outlook for emerging market economies continues to be relatively upbeat, albeit at a slightly moderate pace. Assuming that global financial volatility does not escalate sharply, Asia is expected to remain a bright spot in the world economy,” he added.