Moody’s exec tags risks to PH forecast
Higher inflation and interest rates pose downside risks to Philippine economic growth and Moody’s Investors Service will have to take these into account when it reviews its country projections, a senior official of the debt watcher told The Manila Times.
“We have not yet updated our forecast but in the near term we are going to have start to consider the things that we did not assume when we made that forecast,” Moody’s Vice-President Christian de Guzman said in an interview.
The credit ratings agency currently hold a 2018 growth forecast of 6.8 percent for the Philippines, slightly higher than last year’s 6.7-percent result but below the government’s 7.0-8.0 percent target.
“Downside risks to our forecast are inflation and monetary policy tightening as well as some of the spillovers from softening external demand,” de Guzman said.
Improved government spending was providing some support, he noted.
“When you look at the year-to-date figures, budgetary execution has actually improved quite a bit so I think there is upside risks to growth from government spending,” de Guzman said.
Inflation has topped the Bangko Sentral ng Pilipinas’ 2.0-4.0 target since March, hitting a five-year peak of 4.6 percent in May and prompting monetary authorities to order two successive policy rate hikes.
The central bank’s policymaking Monetary Board, in raising key interest rates for the second time this year in June, noted the need for “follow-through” action to address inflation.
The fresh 25-basis point adjustment brought the central bank’s overnight borrowing, lending and deposit rates to 3.5 percent, 4.0 percent and 3.0 percent, respectively.
The Monetary Board, however, trimmed its inflation forecasts for 2018 and 2019 to 4.5 percent and 3.3 percent, respectively, from 4.6 percent and 3.4 percent previously.
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