The National Economic and Development Authority (NEDA) said the aggressive monetary policy tightening by the Bangko Sentral ng Pilipinas (BSP) would drag down the country’s economic growth this year. During the Wallace Business Forum Roundtable on Wednesday, March 22, NEDA Arsenio M. Balisacan said the effects of central bank policy rate hikes are expected to weigh in on consumer and investment appetite later this year. In February, the BSP raised anew overnight borrowing rate by 50 basis points to six percent, bringing cumulative hikes to 400 basis points since May last year. “Given the lagged effect of monetary tightening, this policy response will likely slowdown consumption and investment as consumers and investors hold off on their spending and plans to expand in the coming months,” Balisacan said. For 2023, the government targets the economy, as measured by the country’s gross domestic product (GDP), to grow by six percent to seven percent, slower compared with the 7.6 percent expansion registered last year. The economy remains driven by consumption contributing nearly four-fifths of GDP growth, while services pitched in close to three-fourths of the expansion. The reopening of the economy after the Covid-19 crisis was critical to the strong growth rebound, as businesses—especially those catering to our tourism, retail, transportation, logistics, and education sectors—resumed their operations and expansion. However, Balisacan has noted that the pent-up domestic demand has began to fade amid skyrocketing consumers prices. Inflation, initially driven by external factors, has now become a policy issue mainly on the domestic front after hitting 8.7 percent in January. The Philippines is presently an outlier among its neighbors in the region, Balisacan said "Tempering food and energy price increases is an urgent imperative to ensure the sustainability of consumption growth,” the NEDA chief said. But Balisacan said “domestic risks to inflation may dampen this [2023 growth] outlook if upward price pressures force BSP to raise its policy rates.” “The most crucial issue that government must urgently address is high inflation,” he said.