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Economic team urged to solve ‘real economy’ constraints

July 02, 2022 - Saturday 3:07 PM by GDM

Article Banner Image Photo from Joey Salceda FB

Albay Rep. Joey Salceda called on the administration’s economic team to focus on “solving constraints in the real economy” and to “shield the poor from largely external factors of inflation” amid calls for faster interest rate hikes by the Bangko Sentral ng Pilipinas (BSP) to address fears of spiraling inflation.

“The decision of the Central Bank on whether to increase rate hikes should be predicated on just two things: whether the country’s inflation is caused by excess liquidity in the Philippine markets, and whether the rate hike relates to the causes of inflation in the Philippines. For now, the answer is largely no, so we should not self-inflict a pain that is, in all likelihood, going to be futile for addressing price concerns,” Salceda said.

Salceda noted that year-on-year, the first quarter broad money only expanded by 7.7%, while gross domestic product expanded by 8.3%. 

“That means the real economy, for now at least, is still growing faster than our money printing. Money supply then, isn’t the problem with prices, as we can clearly see with the main factors: transport, fuel and energy, and food.”

“Between inflation with growth and inflation with slower growth due to an untimely or unnecessary rate hike, I would prefer inflation with growth,” Salceda said.

That’s why Salceda is discouraging calls for more aggressive BSP action on policy rates. 

“I would instead call for just enough policy rate adjustments to expand our room for action should inflation momentum accelerate further. But for now, inflation is mostly not the financial sector’s fault. So financial sector action will hardly make a dent,” he said. 

He stressed that the key is still to produce enough food, find cheaper energy, and solve transport bottleneck.

Salceda backed Bayan Bangon Muli package that is more “inflation-busting” than focused on more spending.

“I am filing a version that is more focused on inflation-busting powers of the President and programs to remove supply constraints. That is the need of the time.”