HIGH inflation will not dampen the country’s growth prospects and efforts to become a major investment destination in the region, according to the National Economic and Development Authority (Neda).
In a press briefing in Dubai, Socioeconomic Planning Secretary Arsenio M. Balisacan said the country’s 6 to 7 percent growth target remains intact despite the 5.3-percent inflation posted in August. He said the low end of the growth target remains attainable.
In terms of investment, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco G. Dakila Jr. said while Foreign Direct Investments (FDIs) are expected to slow to $9 billion this year, their pre-pandemic level of $11 billion next year can be recovered.
“FDIs are usually long-term commitments of investors. So they look at not only the short-term considerations, but the long term,” Balisacan said.
“Inflation is a short-term thing. And if you look at the last 12 years, what we had was quite a stable price regime, policy, financial regime and monetary regime,” the Neda chief added.
Balisacan said the past 12 years have also seen the country battle high inflation, citing 2014 when the El Niño phenomenon caused prices to average 3.6 percent, using the 2018 based Consumer Price Index (CPI).
However, based on Philippine Statistics Authority (PSA) data, using the 2006-based CPI, the average inflation rate in 2014 was at 4.1 percent and peaked at 4.9 percent in June and July 2014.
“Those were triggered by shocks (which) are usually supply shocks, typhoons, droughts, and this will settle down pretty soon, so investors normally don’t take a look at those short-term things for FDIs. They look at the long-term potential of the country,” Balisacan said.
Sustaining the country’s economic performance, however, would require “pushing backlogs” particularly in infrastructure and government’s efforts to implement its programs and projects.
The Government Final Consumption Expenditure (GFCE) in the second quarter contracted 7.1 percent, the lowest since the first quarter of 2011 when it contracted 15 percent.
Part of reversing this trend is the P8.71-trillion Build Better More program, of which a number of projects are expected to see faster implementation in the second half of the year.
The government said this will allow the country to play catch-up with its neighbors in achieving faster economic growth and higher incomes for all Filipinos.
Part of this infrastructure push is “a massive investment in agriculture” which, Balisacan said, includes building irrigation facilities and farm-to-market roads to facilitate logistics and extension services. This will also help ease the country’s inflation woes.
“The whole game is to raise productivity because by raising productivity, you can reduce your dependence on imports and you can get your food cheaper than would otherwise be the case if productivity is low,” Balisacan said.
Earlier, successive typhoons caused commodity prices to surge in August, with vegetables like tomatoes and the country’s staple, rice, leading the charge to increase inflation to 5.3 percent, according to the PSA.
The poorest Filipinos experienced an even higher rate of inflation at 5.6 percent as food inflation for the bottom 30-percent income households at the national level moved at a faster pace of 7.7 percent in August 2023 from 6.1 percent in July 2023 and 7.1 percent in August 2022.
However, the Bangko Sentral ng Pilipinas (BSP) and Neda remain confident that the country’s inflation rate will slow to 2 to 4 percent by the last quarter of 2023.
Image credits: Junpinzon | Dreamstime.com
