High growth, low inflation: Philippines a ‘Goldilocks’ economy


This is Mactan Newtown, a mixed-use development in Lapu-Lapu City. (Ventures Cebu Photo)


A “Goldilocks” economy is characterized by just the right mix of high growth and low inflation.


Has the Philippines entered this state? Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno answers the question with a resounding Yes, adding that there are no possible risks of overheating.


He noted that while the country experienced lower-than-expected growth of 5.6% for the first quarter of 2019, growth is expected to pick up in the second half of 2019 under the catch-up government spending plan.


“Let me emphasize that the country’s economic expansion streak is now 81 quarters, which translates to more than 20 years of uninterrupted growth,” he said during the Wallace Business Forum in Manila on June 19, 2019.


Inflation, on the other hand, has been tamed, allowing the Monetary Board to reduce the BSP’s overnight reverse repurchase (RRP) facility by 25 basis points to 4.5 percent in its policy meeting held in May 2019.


“This decision was aimed at helping inflation move towards the middle of the target range and give due consideration to growth, in line with the BSP’s flexible approach to inflation targeting,” he said.


Inflation is projected to stay within the government’s target range of 3.0 percent ± 1.0 percentage point for both 2019 and 2020.


“This positive alignment between growth and inflation has been a constant narrative and is expected to further lend support to the country’s long-run growth momentum,” Diokno said.

He said the aim is to maintain a “Goldilocks” economy by not allowing markets to create new risks and vulnerabilities.


“This means that we do not only concern ourselves with growth and price stability, but also take into account resiliency. Implementing measures that would further enhance the existence of flexible systems and develop financial markets remains a policy imperative,” he said.


He cited other indicators that continue to be in line with the country’s overall economic growth.


As of end-April 2019, Diokno said bank lending and liquidity grew by 12.7 percent and 7.0 percent, respectively.


The country’s external payments position remains manageable and sustainable as it enjoys support from different fronts.


These include remittances from one, overseas Filipinos (OFs); two, revenues from the information technology – business process outsourcing (IT-BPO) industry; three, receipts from the robust tourism sector; and four, sustained inflows of foreign direct investments.


“In other words ladies and gentlemen, the Philippine economy continues to fire on all cylinders and is expected to see steady economic growth without possible risks of overheating,” he said. (Ventures Cebu)

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