BSP keeps easy monetary policy to sustain recovery

Published November 25, 2021, 12:05 AM

by Manila Bulletin

Editorial

“The Monetary Board maintains that keeping a patient hand on the BSP’s policy levers, along with appropriate fiscal and health interventions, will keep the economic recovery more sustainable over the next few quarters.” Thus did Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno explain the decision last Nov. 18 to keep its two-percent benchmark rate steady and unchanged since November 2020.

Economic growth appears to be gaining momentum following the easing of restrictions that has enabled improved mobility and allowed businesses to upscale their operations. Hence, the BSP is confident that complementary fiscal and health measures will bring about sustainable recovery through 2022.

Particularly encouraging has been the taming of inflation that, as foreseen by the BSP, would fall within the target range of two to four percent after surpassing the 4.0 percent mark at the start of 2021.

For 2022, the BSP expects inflation to fall below the targeted midpoint due to negative base effects and the expected easing of global oil and non-oil prices. Hence, it has adjusted its 2021 inflation forecast to an average 4.3 percent for 2021, but opted to maintain the 2022 and 2023 previous forecasts of 3.3 percent and 3.2 percent, respectively. This year’s inflation estimate is above the forecast of two to four percent.

Anticipated as risk factors for 2022 are the possible adverse effects of storms and calamities on prices of key food items and prime commodities as well as transport fare hikes. Delayed recovery from prolonged effects of the African swine flu epidemic is flagged as a notable risk factor. Another downside element is the persistence of international supply-chain bottlenecks that could also push commodity prices upward. Similar concerns on the domestic front underline the importance of raising levels of farm productivity and competitiveness that have been severely affected by the pandemic.

The factors that could possibly temper inflationary prospects are not entirely beneficial. These include the potential delay in downgrading to Alert Level 1, the lowest in the newly adopted scale of containment measures, if newly-emerging variants or inefficiencies in enforcing health and safety protocols would bring about the need to return to stricter quarantine regimes.

The three-day National Vaccination Program set for November 29-30 and December 1 that aims to vaccinate up to 5 million persons a day underlines the government’s determination to catch up with the delayed attainment of community protection targets nationwide. While Metro Manila’s vaccination rate has topped the 90 percent level, many regions in the rest of the country are still at the 30 percent mark.

Hopes remain high that the fourth-quarter GDP growth will provide sufficient momentum for a steady upward trajectory for the coming year. The recent start of pilot face-to-face classes in the grade school, high school and tertiary levels also augurs well for the full return to normalcy in the education sector. This would be an eloquent expression that the country has indeed learned to live with the challenges of COVID-19 and is back on track toward full recovery.

 
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