BSP revises 2020 inflation target to 1.75%-3.75%, sees flat GDP growth

Published April 30, 2020, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has revised the inflation target range lower to 1.75 percent to 3.75 percent for 2020 and is projecting GDP to either contract by as much as 1% or a neutral zero growth as an impact of the pandemic.

MB file photo.
MB file photo.

The Monetary Board approved the inflation target and GDP assumption on March 26 and by the inter-agency Development Budget Coordination Committee on March 27. The previous projection for GDP was six to 6.5 percent for 2020 versus 5.9 percent actual 2019 GDP, and two-four percent for the inflation target, for 2020 until 2022.

BSP Deputy Governor Francisco G. Dakila Jr. in a report to business groups, said they have also changed the estimated export growth lower to 0.5 percent from one percent, but raised the import growth to three percent from two percent.

The country’s remittances is still hoped to grow by three percent for 2020 to $30.7 billion, however Dakila reiterated that they also see a possible deceleration of 0.2-0.8 percentage point in remittances growth as an update to the projection.

As for foreign investments, Dakila said that because of the global uncertainty due to COVID-19, they expect this to “temporarily dampen foreign investment flows in 2020.”

The projection for balance of payments remains at $3-billion surplus for 2020 while gross international (GIR) reserves’ assumption was $86 billion. The latest GIR is $89 billion as of end-March while BOP as of end-February was in a deficit of $516 million.

Dakila, who presented these latest data at a webinar “Government Response to COVID-19: Policies and Initiatives by Bangko Sentral ng Pilipinas” organized by various European business groups, said the downside risk to inflation still remains to be: The potential impact of a more disruptive pandemic episode on domestic and global growth prospects includes; and crude oil price volatility owing to the price war between Saudi Arabia and Russia.

Despite the negative one percent to zero growth projection for 2020, Dakila said that the Philippines, going into the pandemic, was in a “robust position” after decades of reforms implemented.

“The BSP did its part by aggressively easing monetary policy and launching several liquidity-enhancing measures to mitigate economic and financial fallout from COVID- 19 pandemic, complementing fiscal response from the National Government. However, (the) shape of economic recovery remains highly uncertain with risks heavily tilted to the downside,” he said.

“Because sectors of economy are affected differently, (we) need targeted fiscal, monetary, and financial measures, with fiscal policy continuing to play a dominant role,” Dakila added.