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As PH economy surges, regulator keeps watchful eye on inflation

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The Bangko Sentral ng Pilipinas will be keeping an eye on foreign capital inflows to effectively manage the country’s inflation while the economy continues to grow by a robust pace.

The Philippines now occupies what is called a “sweet spot”—where economic growth is high and inflation is low—and the BSP aims to keep the country there for as long as possible.

According to BSP Governor Amando Tetangco Jr., the central bank will closely monitor foreign capital inflows and implement appropriate measures to guard against excesses and speculative investment activities.

“The BSP will be careful to calibrate the use of its enhanced policy toolkit to help ensure that domestic aggregate demand price pressures and risks from capital flows are managed,” Tetangco told reporters.

The Philippine economy surged by 7.1 percent in the third quarter from a year ago. It was the second-fastest growth rate in Asia during the period next to China’s 7.4 percent.

With the sharp growth rate, monetary officials said, foreign portfolio investments may spike.

Although investments are welcome, excessive amounts may destabilize the economy, officials said. This is because additional liquidity in the economy may lead to a rise in demand and accelerate inflation.

Inflation in the first 10 months of the year remained benign, averaging at only 3.2 percent. For the full year, the government hopes to keep inflation within a range of 3 to 5 percent.

The BSP said it would help keep inflation moderate in the face of growing demand, brought on by strong economic growth.


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Tags: economy , foreign capital inflows , Inflation , Philippines

  • Valentino Paredes

    to Hayek_sa_Maynila
    What is inflatory at 7.1% growth? Nothing, inflaory is that the reported 3% are just a fiction. One has just to compare prices now against one year ago. You can check whatever you want, at least 95% of all goods, foods and basic needs are much much more increased. Some goods are hiding it by not much increasing but there is now less content, rampant at packed goods in supermarkets. Instead of 500 gram, now it is 475 and even less, together with the “moderate price increase” in reality a big increase per kilo or liter content. At a New York market you can get a liter milk for about one dollar, 42 pesos, here it is 65 to 115 pesos per liter. But the NY employee earns at least ten times more. Important is the local purchase power of the peso and this is now, with the “super economy” not half of that when the peso rate was near 55 to the dollar. The BSP anyway does nothing else than telling to watch and blaming the OFW remittances for the blown up exchange rate which steals billions from the OFW families whose dollars save the country from a financial collaps. OFWs send more but the families get less pesos. The same for foreign investors, tourists and the export.

  • EdgarEdgar

    After the initial ecstasy and revelry, the hollow triumphalism of Aquinomics is proving to be nothing but a shortlived hype. One of the president’s men, Trade Secretary Gregory Domingo, admitted off the cuff that the seemingly higher GDP figure for Q3 is entirely attributable to the fact that 2011 saw a dismal growth rate. In fairness to the Trade Secretary, he refused to participate in overplaying last quarter’s GDP. ADB likewise criticized the current administration for not spending enough in 2011 thereby stunting economic growth. Coming from such a low base last year, the public is thus easily led to believe that things today are rosier than rosy, the sky bluer than blue, the glass fuller than half full, and therefore all Filipinos must be happier than happy.

    Credit must also go to the current NEDA Chief Balisacan who clearly knows how to play ball and play up the numbers. Now it can be said that the former NEDA chief Paderanga had to leave government because he clearly lacked the social skills to please the president at whose pleasure he serves. Fudging and flattering were never Padaranga’s strong suit. He is much more at home now and much happier in the academe than he ever was in the government. And as if by some well-calculated coincidence, the departure of Paderanga ushered in a quarter of fantastically spectacular growth under his successor’s watch.

    If Q3 indeed benefited largely from growth in public construction, the more we ought to be vigilant as roads and irrigation projects are lucrative sources of corruption. More so with the upcoming May 2013 elections. And if Q3 indeed benefited just as much from growth in private construction, banks and lending institutions ought to be more mindful of oversupply and quite possibly the rise of non-performing loans. With the Philippine PESO continuing to strengthen, our labor cost will become less competitive than others. BSP’s fanaticism about driving down inflation in the global situation we find ourselves in will do more harm than good.

    All told, the irrational exuberance was fun while it lasted.

  • angtangamo

    Uhuh.

  • Hayek_sa_Maynila

    Why watch inflation? Does the BSP interpret 7.1% growth as inflationary? Doesn’t it remember that the 7.1% expansion was coming from a disappointing 3.2% growth in 3Q2011? What’s inflationary about that?

    On average, our growth is only 5.0% over the last 2 years, nothing spectacular and nothing to worry about. Indonesia is growing by 6.0% to 6.5% since 2010, we are still far behind them.

    If inflation falls below 3.0% again in November, BSP must cut interest rates again on December 13 to cushion the economy against external headwinds.

    It should also do it to stop the appreciation of the peso as it is already costing the economy a lot…a continuous strengthening of the peso will weaken the economy and threaten to erode our chances of bagging an investment grade rating. Less OFW spending, weaker exports and BPO revenues, cheap imports andn loss of jobs among others will be the side effect of a strong peso.

  • http://profile.yahoo.com/AND7MQ5FERICDOIAUW56RYT45A tower_of_power

    Now there is a reason why with the strong economy .. a strong peso … the prices of commodities are still going sky-high while salaries remain low … INFLATION!!! It cannot be helped but be amazed by the economists making palusot!!!

    • Bonggebongge

      Korek…nakakapagtaka….mataas pa din ang bilihin mababa ang sweldo…hindi balanse ang takbo ng pera sa Pinas may mga ilang ilan lang ang nakikinabang, di maiwasang magduda at mainis…

    • Valentino Paredes

      It has simple reasons: The “surging” economy is just a statistical gimmik, or how can a surging economy report the extreme decline of investments? With the super high local price increases, of course the big business has also high gains but this says nothing about the rel economy.
      And the peso is senseless pushed up for to show “good governing”.The blown up peso makes the dollar cheap, at the expense of millions OFW families, while the admin is using it to pay up dollar loans and then make bigger loans again, even at lower interests. It just means that OFWs and common customers pay the price of showing a good governing near to election.
      That the peso rate is manipu;ated shows clearly the fact that its purchase power locally has dramatically decreased, even for goods which are imported with the cheap dollars. The whole blabla about good government and super economy is not more than a bubble which Noy hopes will hold until end of his term. Until then, it is a tool to shovel wealth from the poor to big business and the administration. And BSP is “watching” with closed eyes and an inflation rate which is not a third of the real price increases, no matter commodities, real estate, taxes and fees, rentals or food. Reality is that when inflation is said to be 4% a year, prices often increase more than this in a month.
      Due to government statistics, all inflation rates since Marcos time would not reach 200% while prices are 1000% higher and much more. The whole matter is just a big brainwash attempt to the poor masa.



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