NEDA Warns Implications on Further Raising Interest Hikes

The National Economic and Development Authority (NEDA) has expressed their concerns on the raising the interest hikes and its accompanying consequences on the country’s economy.

NEDA Secretary Arsenio Balicasan urges the Monetary Board, Bangko Sentral ng Pilipinas (BSP) to stop the rate hike in the country. He added that the country is “the most aggressive” in the region when it comes to increasing interest rates.

BSP has increased interest rates by 425 basis points since last year in response to rising inflation.

Balisacan argues that the source of inflation in the Philippines is on the supply side rather than the demand side. In other words, inflation is being driven by factors related to the production and supply of goods and services, rather than excessive consumer demand.

He also mentioned that core inflation, which excludes volatile items like oil and food, has actually decreased, indicating that the overall inflationary pressure might not be as severe as headline inflation suggests.

The impact of further increasing the interest rate in the country could harm the economy as it increases cost of production, depressing consumer demand, and affecting domestic demand in the long term.

Furthermore, increased interest rates could also affect the Philippine peso’s exchange rate, potentially making it too strong compared to trading partners.

Balicasan said that despite the recent uptick in inflation the government’s inflation target of 2% to 4% is still achievable. He also suggests that the lower end of the economic growth target of 6% to 7% is still attainable, even if it’s slightly below 6%. He emphasizes that the Philippines remains one of the best-performing economies in the Asia Pacific region. (ASC)