As PH economy surges, regulator keeps watchful eye on inflation

The Bangko Sentral ng Pilipinas will be keeping an eye on foreign capital inflows to effectively manage the country’s inflation while the economy continues to grow by a robust pace.

The Philippines now occupies what is called a “sweet spot”—where economic growth is high and inflation is low—and the BSP aims to keep the country there for as long as possible.

According to BSP Governor Amando Tetangco Jr., the central bank will closely monitor foreign capital inflows and implement appropriate measures to guard against excesses and speculative investment activities.

“The BSP will be careful to calibrate the use of its enhanced policy toolkit to help ensure that domestic aggregate demand price pressures and risks from capital flows are managed,” Tetangco told reporters.

The Philippine economy surged by 7.1 percent in the third quarter from a year ago. It was the second-fastest growth rate in Asia during the period next to China’s 7.4 percent.

With the sharp growth rate, monetary officials said, foreign portfolio investments may spike.

Although investments are welcome, excessive amounts may destabilize the economy, officials said. This is because additional liquidity in the economy may lead to a rise in demand and accelerate inflation.

Inflation in the first 10 months of the year remained benign, averaging at only 3.2 percent. For the full year, the government hopes to keep inflation within a range of 3 to 5 percent.

The BSP said it would help keep inflation moderate in the face of growing demand, brought on by strong economic growth.