MANILA, Philippines - Bangko Sentral Deputy Governor Diwa Guinigundo said economic fundamentals make the Philippines ripe for accelerated economic expansion but that investors remain conservative.
The government is narrowing its budget deficit and its debt has been upgraded by all three major ratings companies since late last year. The central bank says inflation will likely start to decelerate this month.
"I think we have all it takes to grow but the animal spirit is not there," Guinigundo said at a forum of the Economic Journalists Association of the Philippines. "Some people are not taking the long view in terms of sinking in their money for long-term investment."
|Business confidence in the Philippines
|--Source: BSP April to May survey
Business confidence fell in the second quarter, according to the BSP’s most recent survey, due to rising oil prices, political unrest in the Middle East and Libya and the Japan earthquake and tsunami.
Since the survey was taken in April and May, Greece's continuing financial crisis has raised concerns other economies may be squeezed as well.
Locally, the government has failed to start biddings for its infrastructure projects. It’s also drawn criticism for scrapping or seeking changes in contracts awarded by the previous administration.
Still, Guinigundo said the central bank is ready to act if inflation accelerates more than projected. He said allowing consumer goods prices or asset prices to climb excessively could be disastrous.
"When you allow excess liquidity to simply flow around, even the banks will be in danger sooner rather than later," Guinigundo said. "So yes we may need to tighten our monetary policy, but we have a lot of policy tools."
The central bank has raised interest rates twice this year and then raised banks' reserve requirements to fight inflation.