BSP chief: GDP grew at faster pace in Q4
Philippine economic growth picked up further in the final quarter of last year despite the aggressive rate hikes delivered by the central bank, Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. said.
He said the country’s gross domestic The economy needs to grow by at product (GDP) growth accelerated least 7.2 percent during the October in the fourth quarter after to December period to meet at least expanding by 5.9 percent in the third the lower end of the six to seven percent quarter from 4.3 percent in the second target range for 2023. quarter. The Philippine Statistics Authority
“I think it’s going to be better than is set to announce the fourth quarter Q3 because Q2 was an aberration in and full year 2023 performance of the terms of growth,” Remolona told economy on Jan. 31. reporters on the sidelines of the 2024 The BSP has emerged as the most Annual Reception for the Banking aggressive central bank in the region Community Friday evening. after raising key policy rates by 450
The BSP chief was referring to the basis points since May 2022 to tame slowdown in GDP growth to 4.3 percent inflation and stabilize the peso. in the second quarter of last year, For 2023 alone, the central bank’s from 6.4 percent in the first quarter, Monetary Board hiked interest rates amid slow government spending. by 100 basis points, bringing the benchmark
Economic managers via the Cabinet-level rate to a fresh 16-year high of Development Budget Coordination 6.50 percent, the highest since the 7.50 Committee (DBCC) has percent recorded in May 2007, from maintained the GDP growth target an all-time low of two percent during at six to seven percent for 2023 but the height of the COVID-19 pandemic. narrowed the range for 2024 to 6.5 to This helped tame inflation to a 7.5 percent from 6.5 to eight percent. 22-month low of 3.9 percent in December, the first time it eased within the BSP’s two to four percent target after 20 straight months, from a peak of 8.7 percent in January last year.
Headline inflation accelerated to six percent in 2023 from 5.8 percent in 2022 and breached the target band for the second straight year amid soaring oil and food prices.
In a letter to President Marcos dated Jan. 23, Remolona highlighted the importance of non-monetary measures to help bring inflation at bay as it stands ready to adjust monetary policy levers to mitigate second round effects and better anchor inflation expectations.
According to Remolona, nonmonetary measures are crucial given the significant upside risks to food and transport prices, including the continued constraints on international food trade.
“We wish to highlight the crucial role of non-monetary measures in helping to bring inflation back to a target-consistent path,” Remolona said in his open letter to the President.
Remolona, who also chairs the seven-member Monetary Board, cited the extension of the reduced tariff rates on key agricultural commodities via Executive Order 50 that could temper risks to food prices.
The BSP chief added that other supply-side measures would also be equally important, including strategies to mitigate the potential impact of El Niño in communities, as well as efforts to boost the productivity of the agriculture sector.
Remolona told the President that inflation is likely to settle within the target band in the first quarter of the year due to negative base effects but could accelerate above the target in the second quarter due to the potential impact of El Niño, second round supply shocks and positive base effects.
Based on its risk-adjusted forecasts, the BSP sees inflation breaching the target band anew this year at 4.2 percent before easing to 3.4 percent in 2025.
“On the part of the BSP, we stand ready to adjust monetary policy settings as necessary to mitigate second round effects and better anchor inflation expectations, as we continue to prioritize safeguarding price stability in line with our primary mandate,” Remolona reiterated.