MANILA — An economist from IHS Markit on Thursday said rising world crude prices and the Bangko Sentral ng Pilipinas’ (BSP) tightening of monetary policy are slowing down the country’s economic growth.
IHS Markit Asia Pacific Chief Economist Rajiv Biswas made the statement, following the release of the gross domestic product (GDP) growth figure for the second quarter of the year at 6 percent.
“With the GDP growth rate in Q2 2018 moderating to 6 percent, the lowest year-on-year pace of growth since Q3 2015, the Philippines government and central bank face a more challenging economic outlook of softening growth momentum and rising inflation,” Biswas said in an e-mail.
“A key risk to the near-term outlook is from the risk of further rises in world oil prices, which could push inflation higher and force more BSP rate hikes during H2 2018 and in 2019,” he added.
Early this week, government data showed that inflation rate hit its five-year high jumping to 5.7 percent in July.
The higher global oil prices coupled with the weaker peso contributed to price pressures in the domestic market.
With the rising price pressure, it was expected for the BSP to raise key policy rates as much as 100 basis points for the second half of 2018.
With the 5.7-percent inflation in July, Tokyo-based investment house Nomura projected the BSP to announce another 100 basis points rate hike within the remaining months of the year.
Last month, Deutsche Bank stated that it forecasted the central bank to hike interest rates by 100 basis points for the H2 2018 and another 50 basis points in 2019.
“With the BSP having commenced a monetary policy tightening cycle, the impact of higher policy rates will also be a moderate drag on GDP growth over coming quarters,” Biswas noted.
Aside from the increasing oil prices and inflation pressures that will prompt Monetary Board policy tightening, another downside risk to the Philippines’ economic growth in the near-term is the escalating trade war between the United States and China that “have some negative impact on Philippines manufacturing exports,” according to Biswas. (Kris Crismundo/PNA)
