Further monetary easing not urgent - IMF

WASHINGTON, D.C. – Further monetary easing is not an urgent need for the Philippines as the central bank has room to wait for more news on economic growth.

Hitting as much as eight percent in economic growth will require private and public investments, International Monetary Fund (IMF) officials said.

“Our inflation forecast is around the midpoint of the central bank’s target range,” said Masahiko Takeda, deputy director for Asia & Pacific Department of the IMF.

“So, in that sense, we do not think that any easing is urgently needed for now. Maybe the central bank can still wait and see in terms of where this year the economy is going,” Takeda added.

Last week, the Bangko Sentral ng Pilipinas (BSP) maintained its key policy rates, noting that easing inflation has given it more room to pause after two rate cuts this year.

Key rates remained at record lows of four percent for overnight borrowing and six percent for overnight lending.

The BSP forecasts interest rates to average 3.3 percent this year, which is at the middle range of the 3 - 5 percent target this year.

Meanwhile, the Philippines is poised to post a faster uptick in the economy, IMF officials said.

 Anoop Singh, director of the Asia and Pacific Department of the IMF, said growth is picking up to 4.7 percent this year and 4.2 percent this year.

Growth in gross domestic product ? the value of goods and services produced by the economy ? hit 3.7 percent last year, slower compared with the 7.6 percent record in 2010 given a decline in public construction. It is short of the government’s 5-6 percent target and 4.5-5.5 percent forecast.

“The government sees it closer to 7 - 8 percent. And our view is, in order to achieve that, again, as the government recognizes, it is very important to build investment, both private and public investment,” Singh said.

“In order to achieve the potential growth of 7 to 8 percent, they need to build up investment, private and public infrastructure,” Singh added.

Takeda concurred, saying that growth will pick up amid a subdued global environment.

Takeda said “fiscal spending [last year] was somewhat slow, because the government was introducing a more rigorous procedure for government procurement and investment, et cetera.”

But for this year, fiscal spending will increase the growth potential of the Philippines.

The government is into the “Daang Matuwid” good governance housecleaning campaign to prevent corruption and red tape. Furthermore, its flagship Public-Private Partnership (PPP) program is a list of some 80 projects worth nearly P740 billion.