A herac celleration of inflation is Still the biggest headwind of the economic prospects of the Philippines this year, which can be a risk for the relaxation cycle of the Central Bank, said Moody’s analysis.
“Inflation acceleration is the greatest risk for the Filipino economy and these come from both domestic and external factors,” said Sarah Tan, analysis -economist of Moody, in an interview on Money talks to Cathy Yang On one news on Wednesday.
“In my own country, I think there is the risk that the inflation of food will be increased due to frequent resources that can harm domestic delivery,” she said.
In January, inflation remained stable at 2.9%, although only food inflation accelerated in December to 4%of 3.5%.
Various storms met the country at the end of last year, which resulted in billions of pesos on agricultural damage.
“I think we are worried that we are worried that the rates imposed by the US can lead to global inflation as a result of the disruptions to supply chain,” said Mrs. Tan.
However, she said that the impact of the restrictive trade policy of US President Donald J. Trump in the Philippines will probably be minimal.
“If we take a step back and view the trade relationship between the Philippines and the US, it is quite clear that the trade deficit of the Philippines with the US is quite small, especially if you compare that with other economies, whether it is worldwide or With Asean (Association of Southeast Asian countries) economies. ”
“That really means that it is unlikely that the Philippines are high on President Trump’s list,” she added.
Since he took office in January in January, Mr Trump has already made a rate of 10% on Chinese goods, as well as the tasks on all steel and aluminum imports from March.
On the other hand, Mr. Trump’s plan to impose mutual rates on all countries that charge tasks for the entry of the US a greater impact on the Philippines.
“If there is a universal mutual rate that will be imposed by the US, it will harm the Philippines because the tasks imposed on the US input in the Philippines higher than the other way around,” she said.
“If there is a matching of rates, then Filipino goods will make it more expensive and less competitive to the US, which will ultimately harm our Filipino manufacturers and exporters.”
The US is usually the best destination for goods made by Filipino. In 2024, exports to the US was valued at $ 12.12 billion or 16.6% of the total export turnover.
“I believe that the impact on the Philippines is quite small given the low trading exposure with the US. That said, there are indirect impact channels on the Philippines, “Mrs Tan added.
Risks to relax
The inflatory pressure of these risks can encourage the Bangko Sentral NG Pilipinas (BSP) to be more careful about further relaxation, said Mrs. Tan.
“If we have accelerated inflation again beyond the goal of the BSP, that could delay the timing and size of a potential policy improvement in the Philippines,” she said.
“If that is the case, the combination of loan costs and inflation that will stay higher will be a recipe for further weakening of private consumption, which is not great for the economy, given that it is the main cause of growth. ”
The BSP surprised markets after it had left the benchmark unchanged at 5.75% during the meeting of 13 February. This after the central bank has reduced the rates at three straight meetings since it started his relaxation cycle in August.
Mrs. Tan was the only economist in one Business world Poll of 20 analysts who predicted more than correctly.
“It is a balancing act that the BSP has played. They must balance both inflationary risks and the strength of the peso. “
“But having said that, we don’t expect the break to be felt for a very long time. In fact, the next interest could come in April, which is the next time that the monetary plate will meet, “she added.
Despite the break, BSP governor Eli M. Remolona, Jr. said that a rate reduction is still on the table at the next meeting of the Monetary Council on 3 April.
He also said that the central bank is still a relaxation path, which indicates the possibility of a maximum of 50 basic points (BPS) of cutbacks this year.
“With inflation now largely back on goal, and GDP (gross domestic product) is still growing slightly below the expectations of the government, these will be the next speed faster instead of later causing,” Mrs Tan added.
The GDP of the Philippines expanded in the fourth quarter with a slower than mitigating 5.2%. This brought the growth from 2024 to 5.6% in 2024, short of the goal of 6.5% of the government.
In the meantime, Mrs. Tan said that the coming interim elections in May could give a boost to the expenditure.
“In general, elections, whether it is nationally or between the interim, give the economy a boost, mainly through the consumption channel.”
“So we will see the expenses for campaign -related goods and services increase. But at the same time, you know, all that increase in demand may also indicate bad news for inflation, “she added. – Luisa Maria Jacinta C. Jocson