From the Front Page: FDI down, interest rates raised anew

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Analysts opened the week split on whether or not the central bank would further raise interest rates to arrest the momentum of soaring inflation. While recent policy tightening has proved effective so far, a pause could “afford the economy some space to regain its breath and sustain above-6 percent growth into the medium term.

The monetary board ultimately opted to raise policy rates by 25 basis points (a cumulative 175 basis points this year). The key policy rate is now at 4.75 percent, the highest since March 2009. BSP Deputy Governor Ma. Almasara Cyd N. Tuaño-Amador said this was a proactive move by the central bank to temper inflation risks amid tighter global financial conditions.

Net foreign direct investments (FDI) slipped to $752 million in August, the smallest inflow recorded since March’s $697 million. FDIs infuse capital into the economy, supporting business expansion, generating more jobs and buoying consumer spending. Analysts, however, believe this slide to be temporary, with the BSP asserting that data shows “continued favorable investor sentiment in the Philippine economy.”

Malacañang approved the proposed suspension of next January’s fuel excise tax hike in the wake of Dubai’s crude price levels hitting $80/bbl on Sept. 26. The Finance department has estimated that the tax hike suspension will cost the government P41 billion in forgone revenues, while the central bank expects it could shave 0.2 percentage point off full-year inflation.




The nation is one step closer to breaking up its telco duopoly, as the selection committee for the third major telecommunications service provider denied the motions for reconsideration of the two groups disqualified from last week’s auction. This leaves Mislatel, formed by China Telecommunications Corp., Dennis A. Uy’s Udenna Corp. and its subsidiary, the likely winner.