Metro Manila (CNN Philippines, October 6) — The top official of the National Economic and Development Authority (NEDA) has thumbed down making borrowing costs more expensive as it may further slow down economic growth.
NEDA Secretary Arsenio Balisacan said that while the Philippine economy can still manage more interest rate hikes, it is “unnecessary.”
Imposing higher interest rates forces consumers and businesses to shell out more money to pay off credit cards, and housing and car loans. This would subsequently result in lesser demand, pulling down the prices of goods and services.
“If I were in the Monetary Board, I would say no,” Balisacan said when asked if resuming the tightening cycle could arrest the nagging inflation.
The official said the Bangko Sentral ng Pilipinas has been “the most aggressive” in the region following waves of rate increases, even hitting a 16-year high of 6.25%.
“That’s not something we should be proud of,” Balisacan said.
He warned that pursuing this could hurt consumers and manufacturers as production costs would be more expensive, “depressing” demand, and the economy suffering in return due to its long-term effects.
The NEDA chief said that the problem in inflation came from the disrupted supply.
“There’s really no urgency in creating another round of high interest rates,\” he pointed out. \”Higher interest rates will really put us too far away from our peers in the region.\”
Balisacan also said the peso needs to maintain its “competitive” position.
“A very strong peso relative to our trading partners and peers in the region, hurt our exporters, local producers whose products are for imports,\” he said. \”That’s easily two-thirds of the economy.\”
He even said that a weak peso could bolster local industries and trigger more jobs.
