MANILA -- The Philippine Chamber of Commerce and Industry (PCCI) said it supports the Philippine central bank’s latest rate hike.
The Bangko Sentral ng Pilipinas (BSP) raised its benchmark rate by 50 basis points to slow down inflation.
So far, the BSP has hiked its overnight reverse repurchase rate or policy rate by 175 basis points to 3.75 percent.
BSP Governor Felipe Medalla has said he expects the hikes will slow growth and create problems for some companies, particularly those which are already struggling financially.
But PCCI President George Barcelon said the hike is necessary to stabilize the Philippine peso, which has been depreciating against the US dollar due to rate adjustments by the US Federal Reserve.
"If the peso drops further, it will affect our inflation, which is already high and going to the third quarter. This added burden on the businessmen will definitely take its toll,” Barcelon said.
Barcelon agrees with Medalla that the economy is strong enough to handle higher borrowing costs.
"I would think there might be some effect, but not too much. The real downer before as far as jobs is concerned is the COVID-19 pandemic that we went through. But now, we are starting to see life in the economy," he said.
"Generally speaking, those who have been able to survive against the past challenges, I think will be able to survive," he added.
The businessman said, however, that the higher rates will be painful for smaller businesses.
"Their effect will be to the micro and the small [enterprises], wherein operating the business is really in the short term. This would immediately have an impact because any loan they would be getting or extending would definitely show the effect of the increase in interest rates.”
Barcelon said they are still hopeful the last four months of 2022 will bring more demand and activity to boost businesses. He is hoping businesses will bear no additional burdens during that period.
"We have already headwinds on various aspects on energy and commodity prices. I hope in the remaining 4 months that we have, there would not be any further increases.”
Medalla, however, has already said he cannot guarantee that this week's rate hike will be the last.
Sugar outlook looking better
Meanwhile, Barcelon believes the government has done well to help address the sugar shortage.
"That in itself has taken a toll on some of the food processors and exporters and the like. We are very happy that PBBM [President Marcos] looked into the market and assured the public that there is enough sugar inventory in the pipeline to carry us forward."
"But at the same time, the President is open to the idea [that] if there is any indication that there will be a shortfall, the SRA [Sugar Regulatory Administration] will authorize the importation of sugar but not of the quantity that was ordered previously," he said.
Barcelon said he is also happy to hear Medalla’s comments that the government is getting closer to allowing food manufacturers and exporters to import up to half of their sugar requirement to keep their factories going.
“In the cancelled order of sugar importation, there is a clause there wherein the users, manufacturers, food processor would be allowed to import directly," he said.
"NEDA [National Economic and Development Authority] Secretary [Arsenio] Balisacan mentioned this, I guess it would be in the best interest of everybody wherein we could keep the price of sugar low, and this would really benefit the consumer. It is the consumer who bears the brunt, there will be cost transfer," he explained.