BSP sees inflation at 3-5% until 2014

The Bangko Sentral ng Pilipinas on Thursday said inflation would remain well within the official target of 3-5 percent this year and in 2014.

The BSP added that the Philippines would remain in the “sweet spot” wherein inflation would remain modest despite a robust economic growth.

It noted that the Philippine economy’s latest growth performance—which exceeded most expectations and surpassed even that of China—was driven largely by rising investments by the government and the private sector.

The central bank explained that this indicated that the increased supply of goods and services was being supported, thus helping temper inflation.

“We do not foresee a breach of the inflation target over the policy horizon. [Growth drivers for the first quarter] should help form the base for more durable economic growth going forward,” BSP Governor Amando Tetangco Jr. yesterday told reporters after the release of the report on the economy’s growth in the first quarter.

The National Statistical Coordination Board reported that the Philippine economy, measured in terms of gross domestic product, grew by 7.8 percent in the first quarter from a year ago. (See story on page A1.)

Investments in fixed capital formation, which largely reflected private-sector investments, grew 16.8 percent, accelerating from the measly 2.8 percent in the same period last year. Government spending maintained a double-digit rate of expansion at 13.2 percent. This was, however, slower than the 21.3-percent growth recorded in the first quarter last year. Consumer spending, which used to provide the biggest boost to economic growth, slowed down to 5.1 percent from 6.9 percent a year ago.

Even prior to the release of the first-quarter growth figures, concerns had been raised that the economy might eventually face risks of overheating.

However, Tetangco stressed that due to the shrinking contribution to growth of consumer spending—which boosted demand for goods and services that, in turn, fueled price increases—the economy could afford to continue growing at a faster pace without having to suffer unmanageable inflation.