Lower inflation seen to spur growth

MANILA, Philippines - The softening of inflation rate last month is expected to spur economic growth in the second half of the year, a high-ranking official of the Department of Finance said.

Finance Undersecretary and chief economist Gil Beltran yesterday said the cooling off in headline inflation from 4.9 percent in August to 4.4 percent in September would allow the Bangko Sentral ng Pilipinas (BSP) to keep the interest rates unchanged to ensure stability.

“The economy successfully reversed inflationary expectations through a decisive reduction in food inflation in September. This favorable development will enable the BSP to avoid further tightening of monetary policy and will enable the attainment of a higher GDP growth rate in the second semester,” Beltran said in a statement.

Beltran said the economy is on track for more vigorous growth with the possibility of expanding beyond 7.2 percent despite the absence of election-related spending.

To sustain disinflation and further fuel economic expansion, Beltran said the departments of Agriculture and Trade and Industry “should continue streamlining the delivery of products to the markets and act more decisively if there are factors that constrain the process.”

Aside from this, Beltran said the government should come up with long-term solutions to address the problem of congestion at Manila’s ports.

Manila’s ports account for about a third of the country’s inbound and outbound cargo.

Beltran said increased state spending on infrastructure would likewise translate to stronger economic growth.

The Aquino administration intends to ramp up the share of infrastructure spending to GDP to five percent by 2016 to make the Philippines at par with its Asian neighbors.

To combat inflation, the government must attract more foreign companies to invest in the manufacturing sector.

Manufacturing is one of the key industries that is seen to drive the country’s growth over the next 20 years.