6% growth despite slump
‘The economy is strong and pent-up demand will continue driving the economy this year’
Economic growth in the Philippines will reach at least 6.0 percent this year due to “pent-up” demand in the business sector amid projected slower global output, Bangko Sentral ng Pilipinas said on Monday.
In an economic forum, BSP Governor Felipe Medalla said the estimate is consistent with the government’s 6 percent to 7 percent target for 2023.
“The economy is strong and the pent-up demand will continue driving the economy this year,” Medalla said.
Continued gains of the business process outsourcing sector and remittances is also expected to bolster domestic growth, he added.
Medalla also pointed out that the increasing investment in infrastructure by both the public and private sectors is anticipated to boost the economy even more given the long-term benefits of having appropriate infrastructure.
Meanwhile, Medalla acknowledged that taming inflation is crucial for growing the Philippine economy.
He attributed the high inflation rate of 8.7 percent to strong economic growth and supply-side issues, including protectionist policies that have been embedded for decades.
He emphasized the need for the private sector to decide how much to import and for protection to be a question of tariffs rather than bureaucracy.
The Governor expressed his optimism that the government is already addressing challenges plaguing the Philippine economy.
He also noted that the government must act immediately to reduce inflation in the first part of 2023 but was confident that this was already happening.
“As I keep saying, we believe that we have already done enough to put inflation on a target-consistent path. We’re not yet there, but we’re getting there,” Medalla said.
Nix fees on small transactions
At the sidelines of the same economic forum, Medalla reiterated that BSP had suggested the removal of fees for small-value digital payments for transactions worth P200 to P500 to promote inclusive digital finance and benefit poor Filipinos.
Medalla also mentioned in his speech during the annual reception hosted by the BSP for the banking community last Friday that a transaction fee worth P15 or P20 may still be high, especially for the poor.
“For example, you don’t have much money in your bank account. You pay twice, three times, four times. Maybe you shouldn’t be charged (for the fees), then we’ll find a way for them to get back for their losses for that transaction,” Medalla told reporters.
He added that the high fees discourage people from using digital payments for small transactions.
“(W)e are discussing with (the Bankers Association of the Philippines) on how to make the transactions free for small transactions. Maybe we can set the limit on the number of transactions per day,” he said.
Medalla said small transactions can be both online (such as phone-to-QR transactions) and remittance payments and will be more viable if the BSP lowers the required reserves ratio to help liquidity in the market.