The Bangko Sentral ng Pilipinas said the economy has the potential to sustain a growth of 6-7 percent over the medium to long term.
The BSP said that a growth in the 4- to 5-percent range would be a thing of the past for the Philippines because the country has expanded its production capacity.
Given the economy’s bigger capacity to produce goods and services, the central bank added that the Philippines could maintain a robust growth without having to suffer runaway inflation.
“The potential growth of the Philippine economy has gone up. Based on the BSP’s estimate, the potential growth is now at 6 to 7 percent. This means reduced risk of inflation even as the economy grows by a faster pace,” BSP Governor Amando Tetangco Jr. said.
Keeping a robust growth rate is crucial for the Philippines, whose poverty rate of 27.9 percent is higher than most in emerging Asian economies. Economists have pointed out that the country needed to sustain a growth of about 7 percent over the medium term to significantly reduce poverty.
The government reported last week that the economy grew by 7.8 percent in the first quarter from a year ago, registering the fastest growth rate in Asia and outpacing China’s 7.7 percent.
The Philippine economy’s encouraging performance in the first quarter followed the better-than-target 6.6-percent GDP growth it posted in 2012.
The Philippines was recognized for its strong growth performance in 2012, especially given the global economy’s lackluster performance.
Some economists, however, have warned that the Philippines might soon be facing risks of overheating. They noted that credit expansion in the country has been at a double-digit pace over the last few years and that demand for real properties and financial assets has been growing robustly.
The BSP agreed that close monitoring of factors affecting prices was necessary, but stressed that at this point, there were no signs that the economy would overheat.
It said the economy’s higher production capacity, which could boost the supply of goods and services, would help offset the inflationary impact of rising incomes and growing demand.
The National Statistics Office earlier reported that in the first four months of the year, inflation averaged 3 percent.
The government has set a target of keeping inflation within the range of 3 to 5 percent this year and next. The BSP has expressed confidence that inflation for 2013 and 2014 would settle well within the target, and more likely below 4 percent.