By Tracy Cabrera
MANILA — Approximating that the economy will soon return to where it was before pre-pandemic by (the) middle of the year, finance secretary Benjamin Diokno gave an assurance that the situation is steadily moving towards recovery even as the local economy remains robust to be able to absorb 75 basis points (bps) increase in policy rates.
The former Bangko Sentral ng Pilipinas governor noted that the Philippine economy continues to be strong amidst the prevailing inflation and this could allow the recent monetary policy rate increase by the Bangko Sentral ng Pilipinas (BSP) to be fairly absorbed, given the favorable expansion of economic activity early this year.
The new finance chief’s pronouncement followed the BSP Monetary Board’s decision to raise the interest rate on the overnight reverse repurchase facility by 75 bps to 3.25 percent, effective yesterday, July 14, 2022.
Accordingly, the interest rates on the overnight deposit and lending facilities were raised to 2.75 percent and 3.75 percent, respectively. The BSP previously raised interest rates by 25 bps in May, and by another 25 basis points in June.
“The (Development Budget Coordinating Committee’s) target range for the gross domestic product (GDP) growth rate has been set to be able to incorporate the various pace of monetary policy normalization by the BSP,” Diokno explained during a press briefing.
Last week, the DBCC adjusted the economic growth rate assumption for 2022 from 7-8 percent to 6.5-7.5 percent of gross domestic product (GDP) to reflect recent domestic trends and challenges from external developments.
“Remember (that) the economy was growing at that rate before the pandemic when the policy rate was at four (4) percent. We estimate that the economy will be back to where it was before the pandemic by (the) middle of this year, or by the third quarter of 2022 at the latest. The BSP simply accelerated the normalization process,” Diokno added.
As a final word, the finance secretary disclosed that the national government will continue to adopt a gradual and calibrated path of fiscal consolidation to help sustain the strong growth momentum.
“The growth outlook is supported by the safe re-opening of the economy through loosened quarantine restrictions, as well as the positive impact of structural reforms, including the Corporate Recovery and Tax Incentives for Enterprises Act, the Financial Institutions Strategic Transfer Act, Rice Tariffication Act, and the amendments to the Foreign Investments Act, Retail Trade Liberalization Act, and Public Service Act,” he concluded. (ai/mtvn)