MANILA – The Bangko Sentral ng Pilipinas (BSP) on Thursday maintained that the Philippine economy is not at risk of overheating as global credit watcher Fitch Ratings said the economy could come under downward pressure.
BSP deputy governor Diwa Guinigundo said the economy is not facing any material threat of overheating.
“While credit is growing, the pace of increase is within levels considered manageable based not only on the BSP’s own metrics but even on international benchmarks,” he said.
“Additionally, credit growth in the country is driven not only by consumption, but more importantly by investment activities which boost the economy’s productive capacity,” Guinigundo added.
Fitch Ratings affirmed the Philippines’ investment grade rating of “BBB” with a stable outlook.
“Nevertheless, GDP growth could come under downward pressure, similar to other countries in the region, from the slowdown in China and escalating trade tensions with the US, and from rising domestic and global interest rates” it said.
When an economy overheats, growth becomes unsustainable.
Guinigundo noted the supply situation is currently on a par with demand.
“We see growth in demand continually and sufficiently being matched by rising supply, thereby continuing to dampen demand-side inflationary pressures moving forward,” he said.
BSP governor Nestor Espenilla Jr. noted the harmony in the overall expectations of Fitch and Philippine monetary authorities.
“Fitch’s favorable growth projection for the economy is consistent with that of the BSP. We expect growth to remain solid in the years ahead, owing in part to the BSP’s commitment to price and financial stability, which provides an enabling environment for businesses to thrive and for consumers to keep their purchasing power intact,” he said.
“We will continue to complement the government’s development efforts through conduct of sound and proactive monetary policy and financial supervision,” Espenilla added.
Finance secretary Carlos Dominguez III noted how the Duterte administration’s policy approach is paying off.
“Fitch’s forecast of strong growth in the years ahead affirms the soundness of the Duterte administration’s economic development strategy, which is to sustain high growth, accelerate poverty reduction, and achieve financial inclusion by way of unmatched investments in infrastructure modernization and human capital development without losing its grip on fiscal discipline,” he said. (GMA News)
