BSP Governor Benjamin Diokno
MANILA – The Philippine economy contracted by 9 percent in the first half of 2020 due to the pandemic but price pressures continue to be manageable, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said.
In his presentation during the hearing for the proposed 2021 national budget at the Senate on Wednesday, Diokno cited the 16.5-percent negative output, as measured by gross domestic product (GDP), in the second quarter this year, deeper than the 0.7 percent in the first quarter.
He said strict movement restrictions implemented by the government to contain the spread of the coronavirus disease 2019 (Covid-19) affected the economy.
“Nevertheless, price pressures remain manageable,” he added.
The average rate of price increases in the first eight months this year stood at 2.5 percent, at the lower half of the government’s 2-4 percent target band from 2020-2022.
“If we will compare domestic inflation with other countries, the prices of consumer goods and services in a typical Filipino basket are rising at a healthy pace,” Diokno said.
Diokno said the high inflation rate is detrimental to the economy since “it erodes the purchasing power of households and discourages investments.”
He, however, said deflation is similarly bad “as consumers and investors will lose the incentive to spending (and) invest.”
“Such behavior dampens economic activity which results in higher unemployment,” he said.
Philippine monetary officials forecast inflation to average at 2.6 percent this year, at 3 percent in 2021, and at 3.1 percent in 2022.
“Inflation is projected to remain manageable for the rest of the year and to settle within the inflation target range over the policy horizon,” he added. (PNA)
