\u201cAlready on our third week, if this drags on by another one and a half weeks, growth this year will, together with household consumption numbers [would sink] even further from our original projection of 5.1 percent growth in 2026. It would get closer to last year\u2019s disappointing 4.4 percent,\u201d Neri said.<\/p>\n
Anticipating even slower numbers<\/p>\n
\u201cIt\u2019s disappointing for Philippine standards. And then if this drags on for three or six months, even slower numbers have to be anticipated,\u201d he added.<\/p>\n
Economic growth last year was dampened by weakened infrastructure investment and declining investor confidence, partly attributed to the flood control controversy. As a result, the Philippines missed its national GDP growth target range of 5.5 to 6.5 percent \u2014 equivalent to trillions of pesos in foregone economic output, on top of the trillions allegedly lost to corruption involving government officials and contractors.<\/p>\n
In response, the Bangko Sentral ng Pilipinas (BSP) reduced the target reverse repurchase rate twice from December to February, for a combined 50 basis points, in an effort to stimulate consumption \u2014 the primary driver of the Philippine economy.<\/p>\n
BSP may consider tightening measures<\/p>\n
However, interest rate cuts can also fuel inflationary pressures by increasing liquidity in the financial system. Neri noted that the ongoing Middle East conflict has intensified these pressures, raising the possibility that the BSP may need to reverse course and consider tightening measures. He added that inflation could reach 4 percent as early as next month.<\/p>\n
\u201cAs far as February 28th, the BSP was actually confident enough to not reduce interest rates a few weeks before the pandemic began, or having confidence that we can keep inflation below the 4 percent target again this year after a couple of years of achieving that peak,\u201d he said.<\/p>\n
\u201cBut now, BSP has to take a reverse course, and it seems to be preparing for inflation exceeding 4 percent again as we move along,\u201d he added.<\/p>\n
Closely monitoring developments<\/p>\n
For its part, the BSP said in a statement issued yesterday that it is closely monitoring developments in the Middle East ahead of the Monetary Board\u2019s next policy meeting on 23 April.<\/p>\n
\u201cAhead of the monetary policy meeting on 23 April 2026, the BSP is closely monitoring the impact of the Middle East conflict on Philippine inflation and the economy,\u201d the statement read.<\/p>\n
\u201cPrice stability is the BSP\u2019s main mandate. As such, the BSP is assessing the potential impact of higher oil prices on fertilizer costs, transport fares and overall inflation.\u201d<\/p>\n
Neri added that while rising fuel prices \u2014 and the resulting inflation \u2014 will disproportionately affect lower-income households, the broader macroeconomic impact will be felt across all sectors. <\/p>\n
A very big challenge<\/p>\n
\u201cSo that\u2019s a very big challenge, that combination of high inflation and slow growth. It\u2019s actually one of the toughest [scenarios] that policymakers, both of the national government and the central bank, will have to face up to. Again, very few segments of society will be spared.\u201d<\/p>\n
Domestic pump prices have already risen to over P100 per liter in some areas. In response, both chambers of Congress are moving to pass legislation granting the President emergency powers to suspend excise and value-added taxes on oil products. The President has also vetoed proposed public transport fare hikes to preserve commuters\u2019 purchasing power, while the Department of Trade and Industry has ordered retailers to hold prices steady for the next 30 to 60 days.<\/p>\n","protected":false},"excerpt":{"rendered":"\u201cAlready on our third week, if this drags on by another one and a half weeks, growth this…\n","protected":false},"author":2,"featured_media":355377,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[161364,72,113,161365,61,60,152651],"class_list":["post-355376","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-bpi-economist","tag-business","tag-economy","tag-emilio-s-neri-jr","tag-ie","tag-ireland","tag-middle-east-conflict"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/355376","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=355376"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/355376\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/355377"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=355376"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=355376"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=355376"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}