CLARK, Pampanga -- A ranking official of the Bangko Sentral ng Pilipinas (BSP) said claims of economic overheating is founded on flimsy ground specially since inflation, which has shown the possibility that it has peaked last October, remains driven by supply and not demand.
In a briefing at the sidelines of the consultation event with the private sector and other stakeholders dubbed “Sulong Pilipinas” here, BSP Deputy Governor Diwa Guinigundo said monetary officials still see “limited evidence” of overheating.
He said the domestic economy continues to remain robust, with an average of 6.3 percent average expansion in the first three quarters of 2018.
In the third quarter alone, growth, as measured by gross domestic product (GDP), slowed to 6.1 percent from quarter-ago’s 6.2 percent and the 6.6 percent in the first quarter, due to slower contribution of the agriculture sector and impact of supply issues particularly of rice, fish, meat and vegetables.
These supply-side issues resulted to the an elevated inflation rate, which as of end-October averaged at 5.1 percent.
However, the October figure is steady at 6.7 percent relative to the previous month’s level, which authorities said may be the peak for this year.
Economic officials attributed the steady inflation rate last October to the measures put in place to ensure enough supply of rice, among others. These measures include the release of all rice stocks in the warehouses of the National Food Authority (NFA) to markets.
With inflation seen moderating in the coming months and growth still strong, Guinigundo said claims of overheating of the domestic economy is uncalled for.
“With these results we don’t think (there are threats of overheating) because, one, 2018 inflation is derived from supply sources,” he said.
The central bank official explained that “when you have overheating inflation comes from the demand side.”
Other factors that should be noted is the growth of both the liquidity and credit, which he said, remains consistent with domestic expansion.
“Because the economy is expanding there is financial deepening happening so the increase in domestic credit is just necessary precisely to ensure that domestic economic activities are funded,” he said.
He added that based on the metrics set by both the Bank for International Settlements (BIS) and the International Monetary Fund (IMF) as well as the reading of the BSP, domestic credit growth remains manageable.
These methodologies, he said, “still show that overheating is not relevant or a problem in the Philippines at this point.” (PNA)
