The increase in worldwide inflation that could lead to a rise in interest rates may possibly derail the Philippine economy’s recovery from the coronavirus disease 2019 COVID-19 induced crisis, according to a statement released by the Department of Finance (DOF) yesterday.
“The ongoing rise in global inflation that followed the war in Ukraine may result in a global rise in interest rates that can both disrupt economic activity and potentially derail economic recovery,” the DOF said in its latest economic bulletin.
“The lingering threat of the COVID-19 virus indicate possible surges in the future.
Sustaining the vaccination program and prudently re-opening the economy while maintaining good macroeconomic fundamentals will go a long way to protect economic recovery,” it added.
The DOF said amid external economic headwinds, the next administration should continue and build on the reform momentum to encourage both investment- and export-led growth.
“The rise in infrastructure spending above five percent of gross domestic product (GDP) is also expected to enhance growth in private investment. Data for two decades show that for every percentage point of GDP that public construction rises, private investment rises by 1.34 percentage points of GDP with a three-year lag and 2.03 percentage points of GDP with four to six years’ lag,” the agency said.
The DOF said sustained inflows of foreign investments bring in more dynamism to the economy and provide competition to local players not only in terms of product or service quality, but also in terms of attracting workers.
“Structural reforms such as the recently passed amendments to the Retail Trade Liberalization Act, to the Foreign Investment Act and to the Public Service Act, will help improve the country’s investment climate, encourage more investments into the country, and support investment-led growth,” the DOF said.
