The Philippine central bank sees inflation staying low over the coming years even as economic growth picks up, its deputy governor Diwa Guinigundo said Thursday.
He forecast inflation to average 3.3 percent this year, rising to 4.0 percent next year and then dropping to 3.5 percent in 2015.
The average inflation rate in the first seven months of the year stood at 2.9 percent, giving enough leeway for prices to go up in the remaining months while still staying within official targets, Guinigundo said.
“A rise in economic growth should mean a rise in inflation but that is not so,” he told reporters.
The Philippines posted annnualised growth of 7.8 percent in the first three months of the year, making it Asia’s fastest-growing economy ahead of China.
It is now aiming for growth rates to hit the 7.0 to 8.0 percent target for 2016.
Guinigundo said low international commodity prices and domestic utility rates, as well as stable food prices from rising farm output, had reined in inflation.
The economy now has a higher “absorptive capacity” and could bear greater activity including consumption, he said.
“More people consuming will not necessarily translate to higher inflation. It will translate to higher economic growth,” he added.
The official said there were signs that bank lending was increasing even though loan standards were being maintained.
This indicates that banks now had a higher deposit base, better asset portfolios, a better class of borrowers and had a more favourable outlook towards the economy, he said.
Philippines sees low inflation with high growth
