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April 12, 2024

BSP launches next-generation tool to combat inflation

The Bangko Sentral ng Pilipinas (BSP) has unveiled a groundbreaking tool called the Philippines Supply Chain Pressure Index (PSPI) to closely monitor the impact of supply chain disruptions on the Philippine economy.

This innovative index fills a critical gap in accurately assessing how global and domestic shocks affect domestic prices, inflation expectations, and broader economic effects.

Driven by the need to gauge the impact of global supply shocks during and after the COVID-19 pandemic, the PSPI addresses the limitations of existing monitoring methods. It provides a more precise picture of how supply disruptions translate into real-world consequences for Filipinos.

Early results show the PSPI’s effectiveness in identifying major events like typhoons and pandemic lockdowns that have triggered supply chain shocks. This allows the BSP to anticipate and proactively manage potential economic impacts.

The BSP plans to develop sophisticated models to quantitatively analyze how supply shocks, as measured by the PSPI, influence key economic factors like inflation and price levels. This deeper understanding will further enhance the BSP’s ability to ensure price stability.

The PSPI intends to broaden its scope to capture supply pressures within the service sector, including those arising from demographic shifts and labor shortages. This comprehensive approach ensures a holistic understanding of supply chain dynamics affecting the Philippine economy.