PH investment grade rating may result in unmanageable inflows

Posted at 02/01/13 05:01 PM
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MANILA, Philippines - The Bank of the Philippine Islands (BPI) said the economy can grow faster without producing excessive inflation.

This means businesses can produce enough additional goods and services to absorb additional wealth and demand rather than let that additional demand push prices up too fast.

For BPI economist Jun Neri, the danger remains with inflows from abroad especially after the Philippines gets an investment grade rating.

That's what can cause excessive inflation as well as boost the peso so much that dollar earners such as exporters and BPOs can't compete with China, India, and other countries, and OFWs have fewer pesos to spend.

Neri said only investment, especially in more productive sectors such as agriculture and manufacturing, can create enough demand for the dollars that will pour in as they buy imported raw materials and equipment.

He added while foreign direct investment is weak, it's domestic investors that need to speed up the investment cycle.

ANC News Now, February 1, 2013.