Philippine economic managers assured potential investors that it was starting to get a handle on the country’s record high inflation rate and was moving aggressively on structural changes that would make rapid growth rate more sustainable.
According to the government’s Investor Relations Office, Budget Secretary Benjamin Diokno and Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo gave these reassurances to foreign private sector representatives on the sidelines of the 2018 IMF-World Bank Annual Meetings in Bali Nusa Dua, Indonesia last week.
“The September data showed that core inflation had declined slightly, demonstrating that the BSP’s decisive monetary policy decisions combined with a range of nonmonetary actions were starting to have their desired effect,” the office quoted Guinigundo as saying.
The central bank has so far raised interest rates by a combined 150 basis points since May to combat surging inflation, which hit a nine-year high of 6.7 percent in September. Guinigundo believes that last month’s numbers may have already been the peak given the less aggressive monthly increase in consumer prices.
Surveying the range of monetary and nonmonetary measures being taken to temper inflation, Guinigundo said the central bank would keep “a strong tightening bias” while maintaining a data-dependent approach. He pointed to the numerous measures in place to address supply-side factors such as the price of food, which the BSP and the national government agreed were the main factors behind the rise in inflation.
Meanwhile, Diokno said local inflationary pressures “will temper over the coming year and return within the target band of 2-4 percent by 2019.”
The central bank official also told investors to consider the “broader, global currency market” when evaluating the peso’s weakness against the US dollar. The peso was down 8.4 percent since the start of 2018, making it one of the worst emerging market currencies this year.
“Compared against the currencies of our trading partners relative to inflation, the peso remains both stable and competitive,” Guinigundo said.
Despite this, he pointed out that the Philippines remained one of the best-performing economies in the fastest growing region in the world.
“[Gross domestic product] growth remains strong, [foreign direct investment] inflows are at record levels, infrastructure investment is booming, and we have historically low levels of public sector debt,” the central bank official said, pointing to last week’s data showing a 52.1-percent increase in long-term investments in the Philippines for the first seven months of the year.