NO IMPACT. Bangko Sentral ng Pilipinas Governor Felipe Medalla said Thursday (March 23, 2023) the sustained increases in the central bank's key policy rates have not negatively affected economic growth. He said domestic demand remains robust as proven by, among others, the long lines at restaurants despite upticks in the inflation rate. (PNA file photo)

MANILA – The sustained hikes in the Bangko Sentral ng Pilipinas’ (BSP) key rates are not expected to negatively impact domestic growth this year, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said on Thursday.
In a briefing, Medalla said they expect this year’s economic growth, as measured by gross domestic product (GDP), to be about 6.5 percent, at the middle of the government’s 6 percent to 7 percent assumption.
“As we point it out, one of the reasons that inflation spread(s) quickly, relatively quickly to other sectors, is that the other sectors are actually already facing very large demand. The best example is the rise in restaurant prices,” he said.
Medalla said some restaurants have queues, which is proof that amid the increase in interest and the elevated inflation rate, domestic demand remains strong.
“That’s the reason the higher policy rate, so far, is not really been a major downer on growth. Demand is still quite strong, especially in some sectors,” he said.
However, Medalla said “things may be a little bit more difficult in 2024 when the pent-up demand effects are weaker, whereas the slower global economic growth is more of a factor.”
The economic growth in the last quarter of 2022 slowed to 7.2 percent from the previous quarter’s 7.6 percent but full-year output averaged 7.6 percent, higher than the government’s 6.5 percent to 7.6 percent assumption. 
The inflation rate decelerated to 8.6 percent last February from the previous month’s 8.7 percent, bringing the two-month average to 8.6 percent, higher than the 2 percent to 4 percent target of the government.
Monetary authorities on Thursday reduced the central bank’s average inflation forecast for this year to 6 percent from 6.1 percent previously due to the impact of the BSP rate hikes and the challenging global economic developments. (PNA)