BSP downplays inflation impact of Taal eruption

MANILA, Philippines — The eruption of Taal Volcano may not cause a significant spike in consumer prices nor cause a huge dent on the country’s economic growth, according to the Bangko Sentral ng Pilipinas (BSP).

In a press briefing yesterday, BSP Governor Benjamin Diokno said the central bank is now asses-sing preliminary data to determine the impact of the eruption of Taal Volcano on both inflation and growth.

Diokno, however, echoed the statement of the National Economic and Development Authority (NEDA), saying the eruption may not have a significant impact on prices and the economy.

“I think NEDA has already made an assessment and so with the absence of any assessment on our part, we’ll go along with NEDA and it’s not going to affect too much both the inflation and the growth path,” Diokno said.

According to Diokno, the government must look at the damage caused by the Taal Volcano explosion and compare it to the size of the economy.

“The impact on agriculture, for example, is not that large,” he said.

“Plus, you know if you do the analysis, we have to look at the general equilibrium. So for example, if you lose some tourism in that area, you can bet that tourism will sprout in other areas,” he said.

Diokno, however, said that estimates are still premature as volcanic activities tend to be unpredictable.

“The BSP will update its assumptions and forecasts as new information comes to light, in time for the Monetary Board’s first meeting on monetary policy in Feb. 6,” Diokno said.

“The BSP will continue to monitor these and other developments to ensure that the monetary policy stance remains appropriate and consistent with the central bank’s price and financial stability resources.”

Earlier, Socioeconomic Planning Secretary Ernesto Pernia said the eruption does pose an inflationary risk, but this remains contained barring an escalation of volcanic activity.

Pernia said that the economic impact of Taal’s explosion remains limited for now.

He said ground assessment showed that damage to agriculture as well as income from industry and services output like tourism for Batangas alone, has so far amounted to P7.63 billion in gross value-added (GVA) terms.

Pernia said this is still not enough to make a huge dent in first quarter growth for this year as this only comprises 0.3 percent of gross regional domestic product (GRDP) of the CALABARZON region.

Finance Secretary Carlos Dominguez said the eruption of Taal volcano may likely have a minimal impact on inflation unless there is any escalation in volcanic activity.

The central bank is expecting inflation to settle at an average of 2.9 percent for 2020 and 2021.