BSP believes stagflation is 'not an immediate risk' to economy
MANILA, Philippines — As far as the Bangko Sentral ng Pilipinas is concerned, the Philippine economy is not at immediate risk of stagflation.
In a statement on Thursday, the BSp said it is optimistic the Philippine economy will be able sustain its recovery momentum despite the threat of boiling inflation. Stagflation happens when an economy is facing high unemployment, slow economic growth and rising inflation.
"The BSP is optimistic that the Philippine economy will sustain its recovery given the stronger-than-expected gross domestic product growth of 8.3% in the first quarter of 2022," it said.
"The steady upturn in credit activity, ample domestic liquidity, and favorable market sentiment should also help boost economic activity. Consumer confidence has improved in Q1 2022, while the country’s foreign direct investments yielded net inflows in March," the BSP added.
But for Nicholas Antonio Mapa, senior economist at ING Bank in Manila, the BSP's statement warrants an explanation. For one, rising inflation could dampen growth.
"Growth will likely clock in above 6% but below the official 7-8% target and labor conditions have improved with the economy reopening. So in the strictest sense stagflation may not be a risk," he said in a Viber message.
The Duterte administration's economic managers lowered the Philippine economy's growth target this year to 7-8% from 7-9% previously, owing to external risks and the threat of inflation.
"With the triple threat of accelerating inflation, rising borrowing costs and multi-year high debt, we will likely see growth momentum curbed in the near term. Not exactly your garden variety stagflation, but we’re likely to face a scenario of red hot inflation, elevated debt and slower growth," Mapa added.
Domini Velasquez, chief economist at China Banking Corporation, agreed with the BSP, arguing that the domestic economy’s growth trajectory is still on track despite quickening inflation.
"Agree. Stagflation is not a risk in the foreseeable future," she said in a Viber message. "Despite high inflation this year, we think that our economic growth story remains on track"
Velasquez said the economy, which is still on the throes of recovering from the pandemic, will still face some hurdles such as a dampening of household spending in the second half of 2022. However, she said that the country's relative resilience, as shown in the Omicron variant surge earlier this year, and the economy's reopening will boost job prospects and drive growth.
- Latest
- Trending
