The Bangko Sentral ng Pilipinas (BSP) said on Thursday that inflation rate could be as high as 3.3 percent to 4.1 percent for the month of November, because of the impact of the recent weather disturbances.
In a text message, BSP Governor Amando Tetangco Jr. said that inflation “could pick up in the remainder of the year given the damage to agricultural production and disruptions in the supply distribution channels due to Typhoons Yolanda and Santi.”
Tetangco also said that the 7-percent expansion of the country’s gross domestic product (GDP) in the third quarter of the year affirmed the aptness of the current monetary policy settings. Latest government data showed that Santi and Yolanda’s damage to agriculture was estimated at P3.5 billion and P10.7 billion, respectively.
“Going forward, the BSP will continue to closely monitor the factors that affect movements in prices. This is in line with its primary mandate of delivering price stability conducive to a balanced and sustainable economic growth,” he stated.
In its latest Monetary Board meeting, the BSP said that inflation expectations remain firmly anchored within its target range of 3-percent to 5-percent for 2013 to 2014 and 2-percent to 4-percent for 2015.
However, the central bank raised its forecast for the average inflation rate this year and for the next year.
Average inflation for 2013 was seen at 3.2 percent from a previous forecast of 3 percent. For 2014, the BSP said that inflation could be as high as 4.5 percent from its previous estimate of 3.9 percent.
Tetangco also said that the 7-percent economic expansion of the Philippines in the third quarter affirmed the aptness of the BSP’s current monetary policy settings.
“The GDP performance in the third quarter attests to the underlying constructive dynamics of the economy,” BSP Governor Amando Tetangco Jr. said in a text message on Thursday.
Tetangco said that, “These developments affirm to the appropriateness of current monetary policy settings in supporting sustainable growth in economic activity, consistent with the goal of safeguarding price stability.”
He added that sound macroeconomic fundamentals and credible policy frameworks can sustain the economy’s clear growth potential.
The central bank has kept interest rates for the overnight borrowing or reverse repurchase facility at 3.5 percent, while overnight lending or repurchase is at 5.5 percent. The reserve requirement ratios were kept steady as well.
The interest rates on the special deposit account (SDA) facility were left unchanged at 2 percent. Since January, BSP slashed the interest rates for SDAs by a total of 150 basis points.
Meanwhile, the Department of Finance said that the Philippines should come up with mechanisms to lessen the economic loss due to the effects of climate change.
“Moving forward, a key priority is mitigating the risks posed by climate change by modifying our infrastructure design and locations to better cope with climactic challenges, and coming up with mechanisms to help us better deal with the financial cost of climate change,” Finance Secretary Cesar Purisima also said on Thursday.
The government said that the lower third-quarter GDP can be attributed to the typhoons that hit the country in the past months, which triggered the 0.3-percent decline in the growth of agriculture sector.
“This is where the global community has to work together so we can put together a risk-sharing mechanism beyond aids and grants,” Purisima added.
The Finance chief also noted that based on the latest World Bank estimate, the Philippines lose 0.8 percent of GDP growth to natural calamities annually.