BSP Remains Steadfast In Pursuing Inflation Mandate

The Bangko Sentral ng Pilipinas (BSP) remains focused on combating inflation.

This was the message of  Monetary Board Member (MBM) V. Bruce J. Tolentino and Deputy Governor (DG) Francis G. Dakila, Jr. in meetings before 30 investment funds in Marrakech, Morocco during separate meetings arranged by Bank of America Securities, Barclays, and Standard Chartered Bank on the sidelines of the International Monetary Fund and World Bank Group Annual Meetings.

“We’re carefully watching the risks and remain hawkish. Before we consider any relaxation on the policy stance, we need to be very confident that inflation has been restored to the target,” BSP DG Dakila said during meetings with investors in  Morocco on 12 October 2023.

In relation to this, the central bank sees average inflation settling at 5.8 percent in 2023, and further moderating to 3.5 percent in 2024 and 3.4 percent in 2025. These expectations are also shared by professional forecasters who see inflation reaching 5.9 percent in 2023, 3.7 percent in 2024, and 3.5 percent in 2025.^[1]

MBM Tolentino underscored that addressing inflation involves interventions from both the BSP on the demand side and the National Government on the supply side.

“Managing inflation is the responsibility not only of the central bank.  We share it with the rest of the government, particularly the fiscal authorities, especially at a time when issues driving the inflation rate are supply side-driven,” said MBM Tolentino.

DG Dakila also said that the Philippines’ robust external position continues to cushion the country against global spillovers. He noted that the country’s gross international reserves stood at USD99.6 billion at end-August this year and represented 7.4 months’ worth of imports of goods and payments of services and primary income.

Year-on-year, overseas Filipino remittances also grew by 2.9 percent to USD18.8 billion for the first seven months of 2023, while business process outsourcing revenues rose by 8.0 percent to USD13.6 billion as of June 2023.

DG Dakila said domestic liquidity remains sufficient to support the funding requirements of households and business. He added that Philippine banks remain prudent in its lending activities, with the non-performing loan ratio remaining low at 3.4 percent at end-August 2023.

Department of Finance Chief Economic Counselor Zeno Ronald R. Abenoja joined the BSP officials at the Standard Chartered Bank’s Sovereign Investor Forum.

^[1] Source: Department of Economic Research