The International Monetary Fund said Philippine monetary authorities must watch out for further rise in inflation and tighten policy when needed.
In its October 2017 Regional Economic Outlook Update for Asia and Pacific, the IMF said that in the Philippines and Indonesia, where inflation was close to target, the current monetary stance should be maintained but “authorities should be ready to tighten it if signs of inflation pressure emerge.”
The IMF expects inflation in the Philippines to average 3.1 percent this year and 3 percent next year, still within the government’s 2-4 percent target range in the medium term but faster than the 1.8-percent uptick in the rate of increase in prices of basic goods last year.
As of end-September, headline inflation averaged 3.1 percent.
In September, inflation rose to a five-month high of 3.4 percent year-on-year, which the government had blamed mainly on higher food prices due to weather disturbances that month.
During its Sept. 22 meeting on the monetary policy stance, the Monetary Board kept key rates steady as the BSP’s highest policymaking body deemed that “the inflation environment remains manageable” and will be within target in the next three years.
Also, the IMF said that in the Philippines and China, where credit was growing rapidly, “countercyclical macroprudential measures should be deployed or strictly enforced.”
Meanwhile, the report said that in the Philippines, growth was projected to remain close to potential at 6.6 percent in 2017 and 6.8 percent in the medium term, driven by robust domestic demand.
In Asean-5, which included the Philippines, Indonesia, Malaysia, Thailand and Vietnam, the IMF noted that “growth in the first half of 2017 accelerated in most countries compared with 2016.”
“The Philippines—where growth slowed from 6.9 percent in 2016 to 6.4 percent in the first half of 2017—was the exception, but it was still the fastest growing country in the group,” the IMF said.
Across Indonesia, Malaysia, the Philippines, Singapore and Thailand, average growth was expected to hit 4.9 percent this year and in 2018 as “strong growth in these countries is primarily driven by higher investment and exports,” according to the IMF. —BEN O. DE VERA