DOF's Diokno says inflation may have already peaked in July, peso to strengthen

ABS-CBN News

Posted at Aug 17 2022 12:10 PM | Updated as of Aug 17 2022 05:20 PM

MANILA - Finance Secretary Benjamin Diokno on Wednesday said inflation may start slowing down in the coming months, saying it may have already peaked in July.
 
“Inflation hit 6.4 percent last month but I bet this has already peaked. As you know oil prices have started to go down. So, we expect inflation to start to decelerate towards the end of the year,” Diokno said in a statement. 

He also said the government is confident that inflation will return to the target range of 2-4 percent next year.

Diokno said he also believes the peso will strengthen to the P55-to-the dollar level or even stronger by the end of the year.

“As you know, there's usually an influx of overseas Filipino remittances towards the fourth quarter. The peso has actually stabilized and, in fact, it's strengthening, and so I bet it will be around 55 by the end of the year,” said Secretary Diokno.

The peso has been weakening against the dollar this year as the US Federal Reserve announced aggressive rate hikes to tame inflation in the world’s largest economy. 

However, the peso also managed to regain footing against the greenback after the Bangko Sentral ng Pilipinas announced similar aggressive rate hikes. 

After hitting lows of P56 to $1 in July, the peso has hovered near the 55 level. 

Diokno also said the country’s GDP growth target will not have a “severe impact” from inflation. 

Socioeconomic Planning Secretary Arsenio Balisacan earlier said GDP only needs to grow 5.2 percent in the second half of 2022 to reach a full year growth rate of 6.5 percent – the lower band of the government’s GDP growth target for 2022.

Economic managers have set a target at 6.5 to 7.5 percent GDP growth for 2022, and 6.5 to 8 percent in the next five years.

Diokno also said he doesn’t expect any downgrades in the country’s credit rating despite the country’s huge debt, which hit P12.79 trillion at the end of June. 

“We're confident that we have presented a medium-term fiscal plan, as stated by the President, that is credible and doable. So, we don't expect any downgrade within the next few years. In fact, we are working for an upgrade,” Diokno said.

Reducing the debt-to-GDP ratio to 60 percent from 63 percent today will have to wait until 2025, he said. 

The budget deficit-to-GDP ratio, on the other hand, will decrease to 3 percent by the end of the Marcos administration, he said.

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