The Philippine economy is unlikely to be negatively affected by the string of bank failures in the US and Europe, the National Economic and Development Authority (NEDA) said.
'I don't think that we'll be badly affected,' NEDA Secretary Arsenio Balisacan said during a roundtable discussion of the Wallace Business Forum, Financial Executives Institute of the Philippines, Foundation for Economic Freedom and Management Association of the Philippines yesterday.
He said the situation is not expected to be any worse than what was experienced during the Asian financial crisis in 1997 and the global financial crisis in 2008.
Balisacan also said that in his conversation with Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla, the latter gave assurance that the country's banks are not exposed to the failed banks.
'The fundamentals that we see here are quite solid and do not share the characteristics of the banks in the US and in Europe,' Balisacan said.
Earlier, Medalla assured Malacañang that the Philippine banking sector remains strong and is prepared to withstand shocks from the collapse of global banks.
Balisacan said the most critical issue that must be urgently addressed and is seen to affect the economic outlook most is the stubbornly high inflation.
The government is targeting a six to seven percent economic growth this year, and to further grow by 6.5 to eight percent next year until 2028.
Last year, the economy posted a 7.6 percent growth.
Balisacan said strong demand for consumption and investment are expected to be the primary drivers of growth.
'However, domestic risks to inflation may dampen this outlook if upward price pressures force BSP to raise its policy rates. Given the lagged effect of monetary tightening, this policy response will likely slow down consumption and investment as consumers and investors hold off on their spending and plans to expand in the coming months,' he said.
Even as the country's headline inflation rate eased slightly to 8.6 percent in February this year from the 14-year high of 8.7 percent in January, he said the Philippines is an outlier in the region where inflation in the country's neighbors appears to have moderated.
In the Philippines, he said the economy risks a slowdown as the BSP is forced to tighten monetary policy to rein in inflation.
Last month, the BSP hiked its key policy rate by 50 basis points to six percent.
In the medium to long term, Balisacan said the country would need to raise investment levels in critical infrastructure by encouraging greater participation of foreign capital and the private sector to achieve growth and promote innovation.
He said he is in favor of constitutional reforms that are limited to the economic provisions to attract investments to the country.
'I am in favor of removing restrictions to foreign investment. I am in favor of for example, opening up our practice of professions. I don't see why we are able to compete globally, send our labor workers abroad and we seem to be threatened when we open our labor market to foreigners. I think there are clearly benefits to opening up, removing those restrictions in the Constitution with respect to foreign investment,' he said.
With the limited fiscal space, he said the government is prioritizing public-private partnerships (PPPs) for infrastructure development.
He said there are 97 PPP projects collectively worth about P2 trillion in the pipeline.
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