Philippines Doesn’t Need Additional Stimulus, Tetangco SaysKarl Lester M. Yap and Norman P. Aquino
The Philippines doesn’t need further stimulus now, and the outlook for the global economy suggests the use of caution in monetary policy, central bank Governor Amando Tetangco said.
“Domestic growth in the Philippines is strong, and therefore, we don’t see any real need for stimulus at this point,” Tetangco said today in an interview with Zeb Eckert on Bloomberg Television. “The recent volatility in international markets, owing to concerns of the timing of the Fed tapering would suggest caution in assessing the policy stance.”
Bangko Sentral ng Pilipinas yesterday held its benchmark interest rate at a record-low 3.5 percent and raised its inflation forecasts, saying that a weakening currency poses price-gain risks. The peso has depreciated more than 5 percent this year, and is the worst performer after the yen and the Indian rupee among 11 Asian currencies tracked by Bloomberg.
President Benigno Aquino, who won control of Congress in May elections, this week asked lawmakers to pass measures to boost business competitiveness and improve governance to sustain the nation’s expansion. Gross domestic product rose 7.8 percent in the first quarter from a year earlier, the fastest growth among 17 Asia-Pacific economies tracked by Bloomberg.
“Higher interest rates may come sooner than later as inflation quickens and the Federal Reserve starts tapering stimulus,” said Jonathan Ravelas, chief market strategist at BDO Unibank Inc. in Manila. “The central bank is slowly preparing itself,” he said, adding that the BSP may raise borrowing costs by 25 basis points in the first quarter of 2014.
The peso gained 0.1 percent to 43.31 per dollar, according to Tullett Prebon Plc. The Philippine Stock Exchange Index fell 0.4 percent.
The central bank yesterday raised its price-gain forecasts for this year and next, even as it predicted inflation will remain within its 3 percent-to-5 percent target range. Inflation quickened in June from May, with prices rising 2.8 percent from a year earlier.
The Philippines won its first investment-grade scores from Fitch Ratings and Standard & Poor’s earlier this year. Moody’s Investors Service, which ranks the nation a step below, yesterday said it is reviewing the rating for an upgrade.
“Hopefully, they would be convinced even more that the positive overall performance and the reforms of the Philippine economy are sustainable,” Tetangco said, adding that he expects the Moody’s upgrade to come in the third or fourth quarter this year. “The governance changes so far could cement economic growth on a higher trajectory.”
Aquino is increasing spending to a record in 2013 and is seeking more than $17 billion of investments in highways and airports. Fujifilm Corp. and Sonion A/S began production at new factories in the Philippines this year.