The Bangko Sentral ng Pilipinas hiked its key interest rates by a decade-high 50 basis points yesterday as it moved to curb inflation, while downplaying the impact its action would have on slowing economic growth.
BSP acted hours after the government announced a 6.0 percent growth in the second quarter, a sharp slowing that ended a run of 10 consecutive quarters in which the economy grew at least 6.5 percent.
It blamed the lower-than-expected figures on policy decisions, including the shutdown of holiday island Boracay, which pumps roughly $1 billion into the nation’s economy per year.
"The slowdown is partly due to policy decisions undertaken that are expected to promote sustainable and resilient development," Economic Planning Secretary Ernesto Pernia said, referring to Boracay.
The island was shuttered in April for a six-month clean up on the orders of President Rodrigo Duterte, who branded the resort a "cesspool" sullied by tourism-related businesses flushing sewage into the sea.
Despite the lower-than-expected figures, the Philippines remains one of the best-performing economies in Asia behind Vietnam's 6.8 percent and China's 6.7 percent for the quarter.
In addition to the slower second quarter numbers, Pernia said GDP for the first three months of 2018 was also adjusted downward to 6.6 percent, from 6.8 percent.
"We are also gravely concerned about the almost stagnant output of the agriculture sector," Pernia said, noting a "gross deficiency in the domestic production of food" had helped fuel inflation.
BSP raised its inflation forecasts to 4.9 percent this year and 3.7 percent in 2019, up from 4.5 percent and 3.3 percent respectively.
Following two 25-percentage-point rate rises earlier this year, this increase was the largest made by the BSP since July 2008, when it effected the same increase to combat double-digit inflation.*AFP
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