'Don't worry, be happy', said a pop song from the '80s. And that may well
be the same song that the Bangko Sentral ng Pilipinas is singing these days.
The economic difficulties being experienced by the Philippines at present — high inflation, large dollar outflows and a weakening peso — are nothing more than “growing pains” that are necessary for the country to further develop, according to a central bank official.
If BSP Assistant Governor Restituto Cruz is to be believed, the Duterte adminstration's big investment in infrastructure would pave the way for a "more inclusive, durable and sustainable economic growth path.”
He exlained that the nine-year-high inflation rate of 6.4 percent in August was driven largely by supply-side factors, particularly higher global oil prices, food supply disruptions, and higher excise taxes imposed under the TRAIN law.
He also defended the timing of the monetary authority’s response to rising inflation amid criticism that it raised interest rates too late: "Implementing timely, well-thought-out, and coordinated policy response is key in addressing recent inflation upticks.”
The steady drain of dollars from the local economy, he pointed out, is “largely reflective of the economy’s strength.”
“Running a current account deficit is not necessarily a cause for concern as suggested by underlying trends,” Cruz emphasized, as the significant rise in imports posted in recent years was driven mainly by increased demand for capital goods as the economy continued to accelerate.
The BSP official noted that the central bank continues to adhere to a freely floating exchange rate system and that the depreciation of the peso in the past two years has been largely driven by fundamentals: “This mainly reflects rising demand for foreign exchange traceable to the surge in imports in support of the growing economy; as well as to dollar debt repayments and prepayments and outward investments.”
In short, he said, the three major developments in the Philppine economy should not be seen as problems but as “growing pains”, or adjustments that the domestic economy must make to allow it to grow further in the years ahead.
Do you agree with this assessment, that is, there's no reason to worry about the economy?