WB warns against economic ‘overheating’

The World Bank has warned that the Philippines and a few other Asian countries were facing threats of overheating and suggested that policymakers start shifting focus from boosting economies to containing the buildup of inflationary pressures.

“Though the developing economies of East Asia are generally well prepared to absorb external shocks, an emerging concern is the risk of overheating in some of the larger economies,” the World Bank said in its latest outlook report for East Asia and the Pacific released Monday.

The bank said measures previously implemented to fuel economic growth of the concerned countries were now ripe for withdrawal. It explained that robust growth rates could eventually lead to inflationary problems if policies would remain the same.

“Continued demand-boosting measures may now be counterproductive. Countercyclical demand policies have helped sustain growth, but they may now risk stoking inflationary pressures and amplifying the credit and asset price risks that are emerging in the context of strong capital inflows into the region,” the World Bank said in the report.

In the case of the Philippines, the Bangko Sentral ng Pilipinas brought down interest rates to historic lows in 2012 in a bid to accelerate economic growth.