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Mabuhay 17th Philippine President Ferdinand Romualdez Marcos Jr.
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FMJ ‘defends’ peso
By Nidz Godino
“Number one priority is still inflation…we will continue to use interest rates to mitigate effects,” President Ferdinand “Bongbong” Marcos Jr said in a statement posted on his Twitter his government is ready to “defend” peso as currency’s slide continues to fuel inflation. President Marcos made statement following his meeting with his economic managers in Malacañang to discuss his administration’s “policy directions for the rest of the year and first quarter of next year.”
But the President maintained country’s overall inflation forecast remains better than that of other countries.
“We may have to defend peso in the coming months, but overall forecast is that we are still doing better than other countries in terms of inflation, though economic developments are still anticipated,” he said.
In its Asian Development Outlook 2022 update, Asian Development Bank (ADB) forecasts inflation in the country at 5.3 percent in 2022 and 4.3 percent in 2023.
In Southeast Asia, ADB predicts 17 percent inflation in Lao People’s Democratic Republic in 2022, 16 percent in Myanmar, and 7.4 percent in Timor-Leste.
Recent Pulse Asia survey released in October showed that 42 percent of Filipinos disapproved of Marcos administration’s performance in controlling inflation, which has emerged as top urgent national concern of Filipinos.
In September, inflation accelerated to 6.9 percent, its highest level in four years, due to continued increases in food and utility costs.
This brought the year-to-date inflation rate to 5.1 percent, within government’s 4.5 percent to 5.5 percent target range for 2022.
At a Palace press briefing, Socioeconomic Planning Secretary and National Economic and Development Authority (NEDA) chief Arsenio Balisacan said Marcos government is “on the right track” in combating inflation.
Citing government data, he said sustained increases in inflation in 2022 and 2023 will cause slowdown in the country’s economic growth, translating into a gross domestic product (GDP) level lower by 0.6 percent in 2023 than its expected level had there been no sustained inflation shock.
He said economic team expects rise in inflation to be “temporary,” as it is likely to slow down and return to medium-term target of 2 percent to 4 percent.
President Marcos met with his economic managers to formulate administration’s economic policy directions for the rest of the year up until first quarter of 2023.
The economic team is composed of secretaries of finance, trade, budget, public works and highways, the NEDA director general and governor of Bangko Sentral ng Pilipinas (BSP).
Balisacan said while Philippines “cannot escape effects of these global headwinds,” the administration is “mindful of these challenges.”
He said economic team has laid down its Medium-Term Fiscal Program and Philippine Development Plan (PDP) framed by 8-Point Socioeconomic Agenda, where government has developed critical policy and legislative priorities to address economy’s short-term and medium-term issues for duration of Marcos administration.
“The PDP’s targeted completion before end of the year assures us we will have robust roadmap for navigating short-term challenges and uncertainties…at the same time, we are laying groundwork for faster, more inclusive growth that generates high-quality employment to reduce poverty rapidly,” Balisacan said in a Palace briefing.
“The plan shall include measures to strengthen economy’s foundation for more and higher-quality job creation by addressing most binding constraints to business investment and expansion in growth drivers such as manufacturing and agriculture, tourism, IT-BPOs, construction, and creative industries,” he stressed.
Balisacan further noted PDP also outlines strategies to quickly address constraints in food, energy and transportation systems.
“These actions will mitigate inflationary pressures, protect poor and most vulnerable in society through targeted assistance, and manage socioeconomic scarring, especially for students and micro, small and medium enterprises to hasten our recovery,” he stated.
He added that government has just established policy directions for the rest of the year and the first quarter of next year following the meeting.
Regarding the “short-term issues” of the high inflation, interest, and exchange rates, the NEDA director general assured government is “on track” and is not “distracted by these developments” en route to achieving President’s short-term and medium-term goal for country’s economy.
“Of course, we are looking at the short-term issues, the continuing inflation and ensuring that as we address these short-term issues…we are mindful that we’ll not abandon medium-term goals, and we will make sure that we are on track toward economic recovery, but most importantly, we are also monitoring developments closely so that we can deploy our monetary tools like interest rate, for example, and how we can intervene in financial market to tame these, including depreciation of peso…but again, as we do seek solutions to short-term challenges, we are very careful that we do not compromise our medium-term goals…we just have to put economy on higher growth trajectory so that we can achieve more jobs, high-quality jobs, and reduce poverty rapidly…that’s the overall architecture of the plan,” said Balisacan.
NEDA also said country’s gross domestic product (GDP) may further drop by 0.6 percent in 2023, due to sustained increases in inflation country is facing.
“Our analysis shows that sustained increases in inflation in 2022 and 2023 will cause slowdown in our economic growth, translating into GDP level lower by 0.6 percent in 2023 than its expected level had there been no sustained inflation shock…while we expect our poverty situation to improve as we continue our recovery, inflation and rising interest rates will mute this improvement,” Balisacan said.
According to industry players, Philippines is expected to grow by 6.2 percent in 2023, slightly below government’s target of 6.5 to 8 percent. This is also higher than average 4.6 percent GDP growth for Asean-6 expected in 2023.
The country’s annual inflation quickened to 6.9 percent in September, hitting its fastest pace in four years, mainly due to higher food prices and power rates. The four-year high inflation also firmed up expectations central bank will further hike rates before year ends.
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