BSP monetary policy expected to push up PH economy

Philippine central bank chief Amando Tetangco (left) speaks during a meeting with the Foreign Correspondents' Association of the Philippines in 2008 in Makati City. According to US-based International Institute of Finance, the central bank’s easing of its monetary policy should boost Philippine growth to 5.8 percent in 2012. AFP PHOTO/JES AZNAR

The economic momentum that has built up from the easing of monetary policy may boost the country’s growth to 5.8 percent in 2012 and up to 7 percent in 2013, the International Institute of Finance said in its research note on the Philippines.

The government’s success in containing the budget deficit has given monetary authorities considerable latitude, according to IIF, which is based in Washington, DC.

In 2011, the government incurred a budget deficit of P197.8 billion, which was less than two-thirds of the previous year level. Taking into account the size of the economy, overspending in 2011 comprised only 2 percent, less than the 3.5 percent recorded in 2010.

Also, the debt stock as of end-2011 settled at P4.951 trillion, or just 50.9 percent of gross domestic product—the lowest ratio in the past 13 years.

Last March 1, the Bangko Sentral ng Pilipinas again eased its overnight borrowing and lending rates by 25 basis points to 4 percent and 6 percent, respectively.

“The government still needs to provide more extensive public services than it does at present. So, the key to fiscal sustainability will continue to rest on an overhaul of the inefficient tax region rather than on spending restraint,” said IIF, a global association of financial institutions. “The benefits from maintaining macroeconomic stability should soon pay off in terms of stronger growth for the economy.”