“STAGFLATION” is unlikely to pose an immediate risk to the Philippine economy, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.
“The BSP does not view ‘stagflation’ — an economic condition characterized by slow growth, high unemployment, and rising inflation — as an immediate risk to the Philippine economy,” he said in a statement on Thursday.
The central bank is optimistic the Philippine economy’s recovery will be sustained, Mr. Diokno said, citing the 8.3% gross domestic product (GDP) growth in the first quarter.
He noted the steady rise in credit activity, ample domestic liquidity, improved jobs market, and higher foreign direct investments will help boost the economy’s rebound.
Economic managers are targeting a 7-8% GDP growth this year.
However, inflation quickened to 5.4% in May, the highest in three and a half years and above the BSP’s 2-4% target range.
The BSP last month raised its average inflation estimate to 4.6% this year, higher than the previous estimate of 4.3%.
“While domestic inflation is seen to remain elevated in the near term, as a result of supply-side factors linked to volatile global commodity prices, inflation is expected to revert to the government’s target range of 2-4% by 2023. In the meantime, the balance of risks to the inflation outlook now leans toward the upside for both 2022 and 2023,” Mr. Diokno said.
The central bank repeated its support for “urgent and coordinated efforts” of government agencies to ensure there is enough domestic food supply, as well as direct and targeted interventions for vulnerable sectors.
“The BSP will remain vigilant over emerging price and output conditions and will undertake necessary action to ensure that monetary policy settings remain appropriately calibrated, consistent with the BSP’s price and financial stability mandates,” Mr. Diokno said.
The BSP has already signaled another policy rate hike at its June 23 policy meeting.
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