BSP exec says economy not overheating

MANILA, Philippines - The Bangko Sentral ng Pilipinas said yesterday the economy’s strong economic performance is not expected to lead to overheating as the country’s productive capacity has already improved.

“The current growth trends should not cause concerns... because they are reflecting the dynamism of the economy,” BSP Assistant Governor Cyd Amador told reporters.

“If we’re able to build on that by continuing reforms... you’d expect that this growth rate should not lead to overheating pressures or inflationary pressures,” she added.

The economy expanded by 7.2 percent last year and 6.8 percent in 2012, surpassing government and market expectations.

“Overheating happens when the current level of production in the economy is getting too strong relative to its potential such that it will translate to inflationary pressures or financial assets excesses or prices – consumer prices and asset prices – going to excessive levels,” Amador said.

“But our thinking and we’re convinced that there are fundamental reasons why the productive capacity of the economy has risen over what it used to be,” she continued.

The trend for average annual growth used to be between four and five percent but now it is seen at five to seven percent, she said.

 â€œFor one, capital formation in the country has been rising, resulting in expansion of businesses and therefore also expanding the economy’s capacity to produce,” Amador said.

Amador also said the labor dynamics in the economy has been showing better quality of jobs and an increase in the number of people getting employed despite a slight dip in the official unemployment data.

“It’s not only capital and labor becoming broader but also becoming productive,” she said.

Amador explained that structural reforms put in place and those currently being aimed to be achieved by the government all support to sustaining the robust economic performance.

For this year, the government hopes to grow the economy by 6.5 to 7.5 percent, before pushing expansion between seven and eight percent in 2016.

The National Economic and Development Authority last month said the economy is seen growing by the government’s target in the first quarter, even as the country still suffers from effects of natural disasters that hit in late 2013.