Philippine economy seen to hit 6.5 percent target despite escalated inflation: economist

ABS-CBN News

Posted at Nov 02 2022 10:44 AM

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The Philippine economy is likely to meet the lower end of the government's gross domestic product (GDP) growth target of 6.5 percent despite rising inflation, buoyed by consumer spending, among others, an economist said on Wednesday. 

Inflation accelerated to 6.9 percent in September and is projected to quicken between 7.1 to 7.9 percent, estimates by the central bank showed.

The typhoons that hit the country are seen to contribute to supply-side inflation, UA&P Economist and Professor and Research Director Bernie Villegas told ANC.

However, Villegas said that the Bangko Sentral ng Pilipinas' more aggressive stance in interest rate hikes could help tame inflation and stabilize the peso.

The country's key interest rate has so far been increased to 4.25 percent, with another adjustment expected this month. 

"With the recent typhoons, food prices are really accelerating. That’s really a supply-driven type of inflation. But as we move towards the end of the year, the central bank has become aggressive in increasing interest rate and that will keep our exchange rate below P60. That will definitely help inflation down," Villegas said.

The Philippine peso weakened to its record low of P59 against the US dollar but it has regained some strength and climbed back at the P57 level.

Without inflation, economic growth could be higher, but “with the inflation, I think it [GDP] will slow down to 6.5 percent, but 6.5 percent is still the highest in the Indo-pacific region,” he added.

Growth will come from consumer spending boosted by remittances, and the bullish Business Process Outsourcing (BPO) sector, among others, he said.

The Philippine economy grew 7.4 percent in the second quarter, slower than the revised 8.2 percent in Q1.