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Gov’t 2023 growth aim is still attainable despite rate increases.

With pent-up demand and a rebounding tourism industry cited by Bangko Sentral ng Pilipinas (BSP), and Governor Felipe Medalla as economic drivers, increases in interest rates are not anticipated to significantly slow down the domestic economy’s development in 2023.

According to Medalla, the growth targets set forth by the Development Budget Coordination Committee (DBCC) are still attainable.

The DBCC expects growth to be between 6.5 and 8 percent in the upcoming year, and this expectation extends through the year 2028.

It anticipates growth of between 6.5 and 7.5 percent in 2022.

According to economists and multilateral organizations, domestic growth will range from 5 to 6.3 percent in 2019.

One of the primary growth drivers for the Philippine economy, international tourism, may pick up, according to Medalla, who cited it as a reason for his optimism.

He continued, “Postponed Capex (capital investment) is still there,” adding that “there’s also still quite a bit of pent-up demand.”

HFCE, or household final consumption expenditures, make for over 70% of the economy’s yearly output.

HFCE increased by 8% year over year in the third quarter of this year.

GDP growth increased to 7.6 percent in the third quarter from an upwardly revised 7.5 percent in the second quarter, bringing the year-to-date average to 7.8 percent.

Aside from domestic spending and tourism, Medalla claimed that one of the drivers of the nation’s structural dollar inflows is the business process outsourcing (BPO) industry.

He noted the additional boost to domestic growth that the BPO industry has been giving over the past few years and claimed that it also has “some legs.”

Prior to this, Medalla stated that the strengthening of the domestic economy will mitigate the effects of the ongoing increases in the key policy rates of the central bank.

In an effort to combat the escalating domestic inflation rate, the Monetary Board (MB), which sets policy at the central bank, has raised the BSP’s main rates by a total of 300 basis points since last May.

Last April, when it increased from 4 percent the previous month to 4.9 percent as a result of higher oil prices, the rate of price increases went over the government’s desired range of 2 to 4 percent.

As a result of the increased annual inflation rate of the food and non-alcoholic drinks index, it further accelerated in October to reach 7.7 percent, the highest level since December 2008.

Inflation in the year’s first ten months was on average 5.4 percent.

Medalla predicts that inflation will reach its peak either this month or in January 2023 and that after it slows down, it will keep slowing until it reaches within-target levels by July or August of the following year.

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