High demand is not inflationary – BSP
Published Nov 8, 2018 12:00 am
By Lee C. Chipongian
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said the country’s “excessively high (domestic) demand” is not inflationary.
Diwa C. Guinigundo
Guinigundo was commenting on the latest gross domestic product (GDP) growth of 6.1 percent for the third quarter, noting increased demand from economic-driving industries.
“We do not think that this output performance would indicate excessively high demand that could put more pressure on domestic inflation,” according to Guinigundo. He is currently the BSP officer-in-charge while BSP chief, Nestor A. Espenilla Jr., is again on a week-long medical leave for cancer-recovery treatment.
Inflation rate has steadied at 6.7 percent in October, which was the same in September, but still at a nine-year high.
Guinigundo said the third quarter growth reflects the sustainability of the pace of economic growth.
“What is notable is that it is increasingly driven on the supply side by industry particularly manufacturing and construction as well as by investment and public expenditure on the demand side,” he said yesterday. “While this is modest compared to the first two quarter performance, the last quarter's growth is consistent with our baseline assumption consistent with our forecasts (for inflation).”
The BSP forecasts 5.2 percent inflation for 2018, 4.3 percent for 2019 and 3.2 percent for 2020. These projections were made in September and is expected to be revised next week when the Monetary Board conducts its seventh policy meeting for the year.
Guinigundo reiterated that the 4.3 percent inflation forecast for next year could still be brought down with non-monetary measures and the implementation of the rice tariffication system. If approved by Congress this year and implemented in 2019, the rice tariffication will reduce next year’s 4.3 percent inflation forecast by 0.7 percentage point or to 3.6 percent.
The BSP, to rein in high inflation which continue to be driven mainly by supply side factors as reflected in the uptick in food and energy prices, has raised key rates by 150 basis points since May.
Guinigundo said this week that the BSP “should be seeing lower annual inflation rates for the rest of 2018 through the next two years 2019 and 2020.”
Guinigundo pointed out that the month-on-month inflation has declined from 0.9 percent in September to just 0.3 percent in October even as the year-on-year inflation remained at 6.7 percent.
Diwa C. Guinigundo
Guinigundo was commenting on the latest gross domestic product (GDP) growth of 6.1 percent for the third quarter, noting increased demand from economic-driving industries.
“We do not think that this output performance would indicate excessively high demand that could put more pressure on domestic inflation,” according to Guinigundo. He is currently the BSP officer-in-charge while BSP chief, Nestor A. Espenilla Jr., is again on a week-long medical leave for cancer-recovery treatment.
Inflation rate has steadied at 6.7 percent in October, which was the same in September, but still at a nine-year high.
Guinigundo said the third quarter growth reflects the sustainability of the pace of economic growth.
“What is notable is that it is increasingly driven on the supply side by industry particularly manufacturing and construction as well as by investment and public expenditure on the demand side,” he said yesterday. “While this is modest compared to the first two quarter performance, the last quarter's growth is consistent with our baseline assumption consistent with our forecasts (for inflation).”
The BSP forecasts 5.2 percent inflation for 2018, 4.3 percent for 2019 and 3.2 percent for 2020. These projections were made in September and is expected to be revised next week when the Monetary Board conducts its seventh policy meeting for the year.
Guinigundo reiterated that the 4.3 percent inflation forecast for next year could still be brought down with non-monetary measures and the implementation of the rice tariffication system. If approved by Congress this year and implemented in 2019, the rice tariffication will reduce next year’s 4.3 percent inflation forecast by 0.7 percentage point or to 3.6 percent.
The BSP, to rein in high inflation which continue to be driven mainly by supply side factors as reflected in the uptick in food and energy prices, has raised key rates by 150 basis points since May.
Guinigundo said this week that the BSP “should be seeing lower annual inflation rates for the rest of 2018 through the next two years 2019 and 2020.”
Guinigundo pointed out that the month-on-month inflation has declined from 0.9 percent in September to just 0.3 percent in October even as the year-on-year inflation remained at 6.7 percent.