The economic managers need to keep a good eye on the country’s balance of payments, the government budget and on interest rates to ensure the Philippines keeps to the path of sustainable growth this year and next.
In addition, within-target inflation and a stable peso are as crucial to sustained growth down the line as the other three ingredients, according to latest readings by the Department of Finance (DOF).
“Maintaining good fundamentals by keeping both the budget deficit and balance-of-payments manageable, keeping interest rates at the level that sustains investments, keeping inflation within the target range and allowing the exchange rate to maintain its competitive level will allow the country to recover promptly as it eases the lockdowns set up to battle the pandemic,” the DOF said on Sunday.
How the government spends its money determines whether it needs to borrow down the line, raise new taxes or cut back on the delivery of services to its citizens. An imbalance in the BOP, on the other hand, is not necessarily bad as not knowing how tis may be financed.
Which is why local interest rate structures have to be keenly watched and managed as are inflation whose level impact on consumer behavior.
Then there is the need to keep the exchange rate competitive against the US dollar as the country continues buy capital goods from overseas to reignite the $361 billion Philippine economy made significantly weaker by the pandemic.
For instance, the DOF said, the current account balance, which tells on the direction of trade and on overseas incomes and payments, reverted to a deficit in the first three quarters this year from a surplus last year. Last year’s BOP surplus equal to three percent of local output or the gross domestic product (GDP) reverted to a deficit of just under one percent of GDP.