BSP sees inflation easing to below 4% in Q3 of ‘23

BSP chief eyes measures vs. risks on corporates external exposure

Monetary authorities are keen on addressing data gaps on corporates’ foreign investments and borrowings to determine the private sector’s exposure to external risks and its impact on the domestic financial market and the economy.

In a briefing here Monday, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said the central bank should have a complete picture of the domestic corporates’ exposure to any risks to make the appropriate policies to deter this from affecting the domestic environment.

“The Philippines is a very legalistic country and my own view is that our laws do not prevent us from asking them those questions because after all, we ask households so many questions, right?”he said.

Private firms as well as the public sector are required to report to the BSP their foreign loans.

For one, foreign currency-denominated borrowings of private firms that are guaranteed by the public sector needs prior approval from the central bank.

Those without public sector guarantee need not get prior approval although the company needs to notify the central bank about it and for it to be registered with the

Inflation in the Philippines may ease to below 4 percent between September and October 2023, Bangko Sentral ng Pilipinas Governor Felipe Medalla said on Monday.

BSP if it will be paid using foreign currencies sourced from domestic banks.

Despite this, BSP Senior Assistant Governor Johnny Noe Ravalo, during the same briefing, said they are not yet getting this information from the conglomerate pending the release of some implementing rules.

Despite the current regulations on this, Medalla said “we are not really sure that our data on their exposure and their investment abroad is complete.”

The BSP is “exerting efforts so that we’ll be able to catch up on the data gaps here,” he said adding that “I’ll be lying if I told you that I’m satisfied with our current level of (data that the central bank has).”

“We actually wish we had even more complete data and under the law, we can actually ask them how much they have borrowed from abroad and in what currency, right? And what are the maturities,” he added.

During the same briefing, International Monetary Fund (IMF) Asia and Pacific Department Division chief Dr. Thomas Helbling said the lender is looking at systemic risks among the region’s financial system, citing in particular the major banks.

Inflation cooled to 6.6 percent in April 2023 after hitting a 14-year high of 8.7 percent in January. Medalla attributed this to the government’s shift in importation stance.

“I think the importation stance of the government now will be weighted in favor of controlling inflation versus the tremendous pressure to do something with the farmers,” Medalla said.

The Monetary Board is set to convene the third rate-setting meeting of the year on Thursday, May 18.

Last week the International Monetary Fund said the BSP should hold out on policy eas- ing for now as high inflation risk still persists.

“The BSP has hiked the policy rate by a cumulative 425 basis points to 6.25 percent, more than other emerging market Asian central banks.

After peaking in January 2023, headline inflation has gradually slowed in recent months, but core inflation has remained elevated, calling for tighter-for-longer rates,” IMF said in a statement.