DOT sees full recovery of domestic tourism this year Hike in BSP rates still possible despite slower inflation figure

Ahike in the Bangko Sentral ng Pilipinas (BSP) key rates is still possible despite another deceleration in domestic inflation rate, with economists noting that prices of some commodities remain high and supply issues continue to persist.

The Philippine Statistics Authority (PSA) reported earlier in the day a slower rate of price increases last April to 6.6 percent from the previous month’s 7.6 percent.

However, average inflation in the first four months this year is still above the government’s 2-4 percent target at 7.9 percent.

Core inflation, which excludes volatile oil and food items, also posted slower rate of 7.9 percent from 8 percent last March.

Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort, in a report on Friday, eyes sustained deceleration of inflation rate after noting the impact of better weather conditions on farmers ability to achieve better harvest.

He, however, noted the risks from higher rice prices due to the same development overseas given the supply issues as well as higher electricity and utility prices, jumps in the price of pork due to the African swine fever (ASF), and the impact of the looming El Niño.

Domestictourism in the Philippines is expected to fully recover this year from the effects of the COVID-19 pandemic, according to Tourism Secretary Christina Frasco.

He said a hike in the central bank’s key policy rates, which have been increased by a total of 425 basis points since May 2022 is still possible given the expectations that inflation would remain elevated in most of this year.

He noted, on the other hand, the possibility of a cut in the BSP’s key rates, as recently signaled by monetary authorities.

He said this is possible “if inflation eases further for four to five straight months, at least; or around June 2023, at the earliest; especially if Fed (Federal Reserve) rate cuts are not yet possible by then.”

“But future Fed rate decisions would still be an important consideration in view of the need to maintain comfortable interest rate differentials to help stabilize the peso exchange rate (if the peso becomes volatile), import costs/prices, and overall inflation,” he said.

Relatively, Bank of the Philippine Islands (BPI), in a report, forecasts sustained deceleration of domestic inflation rate if decline in the prices of commodities in the global markets continues.

However, it may take until 2024 before international tourism in the country fully recovers, she added.

Last year, the Philippines generated P1.7 trillion in visitor receipts from international and domestic tourist spending, the DOT said.

Frasco said it is focusing on promoting the Philippines and strengthening tourism from the ground up.

“The Philippines continues to grapple with challenges in terms of infrastructure and connectivity, which is precisely the reason why the President has identified tourism as a priority and directed that there be a whole of government approach towards tourism development,” she said.

Compared to other countries in ASEAN, the country still lacks a well-developed infrastructure and connectivity.

To help boost foreign tourist arrivals in the Philippines, the DOT is aiming to market the country as a medical and wellness tourism destination in Asia.

On Friday, the DOT signed a memorandum of agreement to be a title sponsor and par- ticipate in the International Health and Wellness Tourism Congress in Dusseldorf, Germany next month.

Frasco said the event will expose the country to at least a hundred buyers that have the potential to invest in the Philippines’ medical, health and wellness services. The DOT hopes to also tap the Middle East market.

“The strategic advantage that we have in the Philippines is that our OFWs, having introduced that level of compassionate care, now have brought attention to the Philippines as a destination, where you don’t only receive medical attention, but you can also enjoy the host of other destinations that we offer,” Frasco said.