Pandemic still a threat to recovery

The COVID-19 pandemic remains a downside risk to the country’s recovery from the economic recession and inflation outlook, the Bangko Sentral ng Pilipinas said.

BSP Governor Benjamin Diokno said the global health crisis is still a threat to the country’s recovery from the pandemic-induced recession as well as inflation outlook.

“However, improvements in external demand as well as the continued rollout of the government’s COVID-19 vaccination program and other stimulus measures will bolster economic recovery,” Diokno said.

The Cabinet-level Development Budget Coordination Committee (DBCC) is set to meet this month to review the 6.5 to 7.5 percent gross domestic product (GDP) growth target this year.

The BSP chief earlier said the country may experience a slower recovery with a GDP growth of about six to seven percent this year due to the reimposition of stricter lockdown measures in the National Capital Region and four adjacent provinces or the NCR Plus.

Malacañang placed NCR Plus under enhanced community quarantine from March 29 to April 11 and under modified ECQ from April 12 to May 14 as new cases continued to soar.

“The Monetary Board will consider the latest price developments along with information from the first quarter national income accounts in its review of the monetary policy stance on May 13,” Diokno said.

He said the BSP remains watchful over the evolving economic conditions and challenges brought about by the pandemic to ensure that the monetary policy stance remains consistent with its price and financial stability objectives.

Inflation averaged 4.5 percent from January to April this year, still above the BSP’s two to four percent target, due to supply-side shocks including the impact of weather-related disturbances and African swine fever (ASF) on food prices particularly meat.

“The latest outturn is consistent with expectations that inflation would remain elevated this year, owing to supply-side pressures, before settling close to the midpoint of the target range in 2022,” Diokno said.

The BSP chief explained the timely approval of the temporary cut in pork import tariffs would help address supply constraints and ease price pressures going forward.

“In addition, inflation expectations remain well-anchored to the inflation target over the policy horizon. The balance of risks to the inflation outlook remains balanced around the baseline path in 2021, while leaning toward the downside in 2022,” Diokno said.

Based on its latest assessment last March 25, the Monetary Board hiked its inflation forecast to 4.2 percent instead of four percent this year.

The BSP emerged as one of the most aggressive central banks in the world last year after aggressively slashing the benchmark rate by 200 basis points to hit an all-time low of two percent. Its COVID-19 response measures unleashed P2 trillion into the financial system. –