No recession in ʼ23, but PH growth to slow, says BSP

Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said on Friday the Philippine economy’s growth will likely slow down next year, but there will be no recession, easing concerns over the magnitude of the adverse impact of the central bank’s continued rate hikes.

“Well, the Philippines, the question is not recession but the extent to which growth declines. The IMF (International Monetary Fund) for instance thinks that growth rate will be 5 percent next year, whereas the Philippine government thinks it will be at least 6 percent,” Medalla said in an interview with American cable news channel MSNBC.

“If it turns out the global scenario is much worse than we are thinking now, then maybe the Philippine government estimates will go down a hundred basis points. The IMF estimates may go down by a hundred basis points, too. So, it’s slow growth, not a recession,” he added.

Yesterday, the BSP hiked its policy rate by 0.75 percentage point, matching that of the latest move by the US Federal Reserve to help quell inflation in the country.

Faster inflation

The Monetary Board, the central bank’s seven-person policy making body, decided to raise the interest rate on their reverse repurchase facility by 75 basis points (bps) to 5 percent, effective on Nov. 18.

The interest rates on the overnight deposit and lending facilities were also set to 4.5 percent and 5.5 percent, respectively.

Medalla said the BSP sees annual inflation exceeding their previous expectation of 2 to 4 percent in 2022 and 2023, to reach 5.8 percent next year and 4.3 percent the year after, thus the need for another rate hike.

Price hikes

The Philippines’ consumer price index climbed 7.7 percent last month—the fastest rise since December 2008—driven by price gains in key commodity groups, specifically food and nonalcoholic beverages.

Earlier this month, National Statistician Dennis Mapa said it was not certain that inflation had peaked in October, citing there was substantial probability that it could be higher in November.

The October inflation number puts the year-to-date figure at 5.4 percent, within close proximity of the BSP’s most recent projected range of 5.6 to 5.7 percent.

Two consumer rights groups —Alliance of Concerned Consumers in the Philippines and the Rights Action Philippines—expressed wariness about this latest rate hike, voicing concerns over how it affects loan and credit card rates.

“It sounds like the BSP will go for another rate hike next month, at the very least, with more fighting talk in the official statement,” Miguel Chanco, chief economist at economic research firm Pantheon Macroeconomics.

“That said, we see scope for a smaller increase in December, assuming that the Fed makes a similar pivot just before the Board meets,” he added. INQ