Economic growth may have slowed down since the start of 2014, but leading indicators still point to an expansion within the government’s more ambitious target for the year.
The Bangko Sentral ng Pilipinas (BSP) yesterday sought to put to rest fears of the economy overheating with a senior official noting that the abundance of liquidity in the financial system was fueling structural growth, not higher consumer or asset prices.
“The current growth trends are reflecting the dynamism of the economy,” BSP Assistant Governor Cyd Tuano-Amador said.
Speaking to reporters, Amador, who heads the BSP’s monetary policy sector, said several leading indicators tracked by the regulator pointed to the sustained expansion of the Philippine economy.
The economy as measured by the gross domestic product (GDP) grew by 6.5 percent in the fourth quarter of 2014, due largely to the slowdown in several regions resulting from the damage caused by Super typhoon “Yolanda.”
Prior to the slowdown, GDP growth topped 7 percent for the first three quarters of 2013. This brought the full-year average to 7.2 percent, which was better than the state’s target of 6 to 7 percent.
Based on latest indicators tracked by the BSP, growth is expected to stay within the administration’s GDP growth target of 6.5 to 7.5 percent.
“We are seeing growth that’s within the government target. It will slow down but still within the government’s target,” Amador said. Indicators tracked by the BSP included the purchasing manager’s index (PMI) for the manufacturing sector, inflation, car and electricity sales, and remittances from overseas Filipinos.
She added that it was unlikely that the economy would overheat, resulting in inflated consumer and asset prices, despite the country’s solid performance.
Earlier this week, the BSP reported that the country’s money supply rose by a record 38.6 percent in January, accelerating from 32.7 percent the month before.
The local property sector has also been a source of concern, given its history of booms and bust that resulted in crises for the rest of the economy.
Amador said property prices have risen at reasonable levels, reflective of growing demand from real consumers—particularly overseas Filipinos and young professionals—instead of speculative investors.
“We had some heady days in the Asian financial crisis because [homes are] the largest asset that any household can own,” Amador said. “Fundamentally, it’s an obvious candidate for possible misalignments … but we’re not seeing signs of that yet.”
Amador said the BSP would not let up in its monitoring of trends in the property sector given its importance to the economy and the potential damage it could cause if left unchecked.
Part of these efforts is the creation of the so-called Residential Property Index or Repi, which is being finalized by the BSP. This index will track the price of homes in the country using data on construction materials, building permits and other indicators.
She said the proposal for periodic Repi reports has been approved by the central bank’s policy-making Monetary Board. The next step would be presenting these guidelines to the newly created Philippine Statistics Authority (PSA) for comments.
“We want to present it to the PSA, but they are still organizing themselves. They haven’t formed a board yet. Once they have, we’ll present (the Repi),” she said.