BSP tags risks to growth, stability

The Bangko Sentral ng Pilipinas (BSP) has identified the impending rate hikes in the US, the negative interest rates in Japan and Europe, soft oil prices, and the impact of El Niño as challenges to the country’s positive position.

BSP Governor Amando Tetangco Jr. said challenges to the 68 straight quarters of positive economic growth came mostly from the external side particularly the divergence of monetary policies in the advanced economies.

Tetangco said the US Federal Reserve is poised to raise rates further albeit at a slower pace than first indicated last December. He cited as well the negative interest rates imposed by the European Central Bank and the Bank of Japan.

“This may raise near term financial market volatility. But we are hopeful the policies adopted would result in a sustainable growth trajectory for these countries and would create positive ripples to our own trade and growth prospects,” he said.

Another cause of concern, Tetangco explained, is the Middle East as oil prices fell sharply.

“While oil importers like the Philippines benefit from the price drop, low oil prices are double-edged. Oil exporters may cut back on capital expenditures. This may have an adverse effect on the Philippines in general, and on overseas Filipinos, should oil producers cut costs and trim staff,” Tetangco said.

According to Tetangco, there is a need to manage the near-term impact on financial market volatilities and the gov- ernment should consider more long-term solutions to possible disruptions.

In the domestic front, Tetangco took note of the intensification of El Niño phenomenon as well as the persistence of infrastructure gaps.

The BSP chief added the results of the upcoming national and local elections could also influence global perception of Philippine growth prospects.

However, he pointed out robust domestic demand and the benign inflation

environment would continue to persist this year.

The country’s gross domestic product (GDP) growth accelerated to 6.3 percent in the fourth quarter of last year from the revised 6.1 percent in the third quarter. This brought to 68 the number of consecutive quarters that the Philippines recorded a positive GDP growth.

On the other hand, inflation eased to 1.4 percent last year from 4.1 percent in 2014 amid stable food prices and cheaper utility rates. The rate was way below the two to four percent target set by the central bank.