Logo of Phnom Penh Post newspaper Phnom Penh Post - Philippines boosts rates despite economic slowdown

Philippines boosts rates despite economic slowdown

Content image - Phnom Penh Post
A vendor holds a calculator as he computes his earnings from selling clothing items at a market in Manila on Thursday. TED ALJIBE/afp

Philippines boosts rates despite economic slowdown

The Philippine central bank hiked its key interest rates by a decade-high 50 basis points on Thursday as it moved to curb inflation, while downplaying the impact its action would have on slowing economic growth.

The monetary authority acted hours after the government announced a 6.0 per cent growth in the second quarter, a sharp slowing that ended a run of 10 consecutive quarters in which the economy grew at least 6.5 per cent.

It blamed the lower-than-expected figures on policy decisions, including the shutdown of holiday island Boracay, which pumps roughly $1 billion into the nation’s economy per year.

But with prices increasing at a five-year high of 5.7 per cent in July, central bank governor Nestor Espenilla said inflation was the priority, while stressing the gross domestic product growth rate was “pretty decent” and economic expansion was not at risk.

“Favourable conditions arising from sustained domestic growth also suggest that the economy can accommodate a further tightening of monetary policy settings,” Espenilla said.

The central bank on Thursday raised its inflation forecasts to 4.9 per cent this year and 3.7 per cent in 2019, up from 4.5 per cent and 3.3 per cent respectively.

Following two 25-percentage-point rate rises earlier this year, Thursday’s increase was the largest made by the Philippine central bank since July 2008, when it effected the same increase to combat double-digit inflation.

The monetary authority’s overnight repurchase facility rose to 4.0 effective Friday, while interest rates on overnight lending and deposit facilities were also raised.

The move followed similarly aggressive steps taken by central banks in developing countries to curb the fallout from rising US interest rates and a stronger dollar.

Earlier on Thursday Manila announced slower economic growth in the second quarter, which fell well short of expectations. Forecasts in a Bloomberg News survey put growth at 6.6 per cent.

MOST VIEWED

  • NY sisters inspired by Khmer heritage

    Growing up in Brooklyn, New York, Cambodian-American sisters Edo and Eyen Chorm have always felt a deep affinity for their Cambodian heritage and roots. When the pair launched their own EdoEyen namesake jewellery brand in June, 2020, they leaned heavily into designs inspired by ancient Khmer

  • Schools drawn into Manet degree row

    Prime Minister Hun Sen stepped into the Hun Manet-Sam Rainsy war of words over the validity of Manet’s degree from the US Military Academy at West Point, set off by Rainsy’s claims that Manet had received a “second-class degree” or “honorary degree”. Hun

  • Cambodia records first Omicron community case

    The Ministry of Health on January 9 reported 30 new Covid-19 cases, 29 of which were imported and all were confirmed to be the Omicron variant. The ministry also reported 11 recoveries and no new deaths. Earlier on January 9, the ministry also announced that it had detected the Kingdom's

  • The effects of the USD interest rate hike on Cambodian economy

    Experts weigh in on the effect of a potential interest rate expansion by the US Federal Reserve on a highly dollarised Cambodia Anticipation of the US Federal Reserve’s interest rate hike in March is putting developing economies on edge, a recent blog post by

  • PM eyes Myanmar peace troika

    Prime Minister Hun Sen has suggested that ASEAN member states establish a tripartite committee or diplomatic troika consisting of representatives from Cambodia, Brunei and Indonesia that would be tasked with mediating a ceasefire in Myanmar. The premier also requested that Nippon Foundation chairman Yohei Sasakawa

  • Kampot tourism quay ‘90% done’

    Construction on Kampot International Tourism Port – a 4ha quay in Teuk Chhou district about 6km west of Kampot town – has fallen off track, reaching 90 per cent completion, according to a senior Ministry of Tourism official last week. The project is now planned to be finished