The Philippines doesn’t need to tighten monetary policy further, the nation’s economic planning chief said on Friday, pushing back against the central bank’s hawkish bias.
(Bloomberg) — The Philippines doesn’t need to tighten monetary policy further, the nation’s economic planning chief said on Friday, pushing back against the central bank’s hawkish bias.
“I look at our neighbors, and how we have been using our monetary tools to address inflation or other concerns, and our policy rates stand out,” National Economic and Development Authority Secretary Arsenio Balisacan said at a briefing, noting how the nation’s borrowing costs are the highest in the region. “That’s not something we can be proud of.”
Balisacan said there’s no urgency for the Bangko Sentral ng Pilipinas to resume policy rate increases as inflationary pressures are supply-driven. Higher rates are “increasing the cost of production and depressing consumer demand,” he said.
His position contrasts with BSP Governor Eli Remolona, who has signaled readiness to pivot again to raising interest rates as inflation accelerates.
The Philippine central bank’s key interest rate is at a 16-year high of 6.25%, after its most aggressive policy tightening campaign in two decades led to 425 basis points in cumulative increases from May 2022 to March this year.
While the Philippine economy can handle further monetary tightening, Balisacan warned of its long-term impact. “If they do it now, we will still feel that a few quarters down the road,” he said, adding that the government is working on non-monetary measures to tame inflation.
President Ferdinand Marcos Jr.’s administration is aiming to grow the economy by at least 6% this year, but institutions like the International Monetary Fund and the Asian Development Bank see 2023 growth falling below that target. The central bank expects expansion to slow to 4.9% this year and to 4.5% in 2024.
A weaker Philippine peso is net positive for the economy as it benefits local producers, Balisacan said. The currency was up 0.1% at 56.62 against the dollar at 3:08 p.m. local time, poised for a third straight day of gains.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.