With inflation expected to remain modest and the economy maintaining its robust growth, the country will likely remain in the so-called “sweet spot” throughout 2014, according to the Bangko Sentral ng Pilipinas (BSP).
“We expect the momentum of manageable inflation and strong growth to continue this year,” BSP Governor Amando Tetangco Jr. on Tuesday said.
He said this amid concerns that the recent calamity, which hit central Philippines in November, and a potential slowdown in some emerging markets could dampen growth of the Philippine economy this year.
The government has set its 2014 economic growth target at a range of 6.5 to 7.5 percent, and inflation target at 3 to 5 percent.
Last year, the Philippines was one of the fastest-growing economies in Asia, with an average growth of 7.4 percent in the first three quarters.
This came about while inflation stayed modest, hitting an average of 3 percent in the full year.
The BSP attributed the combination of high growth and low inflation last year partly to rising investments and growing manufacturing outputs, which boosted supply of goods and services, thereby tempering the impact of rising demand on domestic prices.
Tetangco acknowledged there were risks to the Philippines’ favorable economic situation. These, he said, included a potential economic slowdown in China and other emerging markets, as well as the withdrawal of the stimulus program by the US Federal Reserve.
The former could dampen export earnings. The latter could cause an outflow of portfolio funds and depreciation of the peso, which could push prices of imports and overall inflation.
Tetangco stressed, however, that the country’s chances of hitting its growth and inflation targets for 2014 were bigger than missing those.
He also said the BSP was closely monitoring domestic and external factors affecting domestic prices. The central bank was prepared to implement measures, as necessary, against factors that could potentially disrupt the positive growth and inflation momentum.