BSP: “Our estimates under the output gap could close in the second half of this year and then it will turn positive thereafter.”
BSP — The Bangko Sentral ng Pilipinas said that possible normalization in monetary policy may start by the second half of 2022.
This, as the output gap caused by the COVID-19 (coronavirus disease 2019) pandemic in the Philippines is expected to close in the second semester of this year.
According to BSP Deputy Governor Francisco Dakila Jr., the manageable inflation, as well as the continued recovery of the economy from the pandemic-induced recession in the country, gives the Monetary Board room to maintain an accommodative policy stance.
Dakila said that their estimates under the output gap could close in the 2nd half of 2022 and will turn positive thereafter.
The economy bounced back with a GDP expansion of 5.6% in 2021 after slipping into recession in 2020. Economic managers are expecting faster GDP growth of between 7% and 9% for 2022.
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Dakila also said that inflation may settle within the 2% to 4% target over the policy horizon or at 3.7% for 2022 and 3.3% for 2023 despite the possible emergence of demand-driven price pressures when the output gap closes.
According to Dakila, there’s enough headroom for continued accommodative monetary policy in the near term, with possible normalization to start toward the 2nd half of 2022.
BSP Governor Benjamin Diokno, meanwhile, said that the central bank would continue to carefully develop its plans for the eventual normalization of its extraordinary liquidity measures when conditions warrant, given the stronger signs of recovery in labor market conditions and output growth as well as improvements in domestic financial markets.
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