MANILA -- The Bangko Sentral ng Pilipinas (BSP) acknowledged on Friday more modest growth this year than in the immediate past but expressed continued optimism on the country’s ability to deliver within-target growth performance for 2014.
On whether the growth target is still realistic due to the lower-than-expected growth print in the first three months, BSP Governor Amando M. Tetangco Jr. said the outlook for local output, measured as the gross domestic product (GDP), this year remains positive.
“Prospects remain positive we may still be able to achieve the government’s target, although growth could settle at a more moderate pace,” Tetangco said in an e-mailed response.
The Philippine Statistics Authority (PSA) recently reported the country’s growth performance in the first three months slowed to 5.7 percent, in part, according to Tetangco, to waning base effects.
The first-quarter growth numbers proved lower than the average growth of 7.2 percent in 2013. This was also below the government’s target growth range of 6.5 percent to 7.5 percent this year.
Tetangco anchored his optimism on the performance of the economy down the line to favorable business and consumer confidence readings, strong demand for exports and credit growth, as well as to accelerated spending during the year, as the economy recovers from the debilitating impact of Supertyphoon Yolanda.
“Favorable business and consumer confidence readings, robust credit growth, stronger export demand due to a pickup in global growth, and fiscal stimulus from reconstruction and rehabilitation spending could provide a boost to domestic activity,” Tetangco said. “The sustained growth in investments also indicates that domestic demand conditions are firm, and this could help the economy regain some momentum,” he added.So-called headwinds preventing the $250-billion economy from hitting its growth goals this year include for the most part the changing global financial conditions.
“The outlook for the domestic economy, however, is not without risks. Global financial conditions could tighten as the US Federal Reserve continues to taper its quantitative easing program. Slower growth in China could impact regional supply chains and pose challenges to Philippine export growth,” Tetangco said.
Likewise, the central bank governor also said the anticipated slowdown in domestic liquidity growth, which has the potential to upset the balance between the need for stable prices against the need to ensure sustained growth, has performed “within the expected path.”
The central bank has had to tighten the banks’ deposit reserve ratio on two occasions this year to mop up so-called excess liquidity in the system that may cause instability, particularly on prices.
“The M3 growth slowdown is within the expected path projected by the BSP. As the twin reserve requirement adjustments [which took effect in April 11 and May 30) continue to work their way, we see M3 growth reaching normal levels in the second half of the year,” the central bank said.