BSP says P22 wage hike not inflationary

MANILA, Philippines – Monetary authorities said the P22 increase in the daily minimum wage for workers in the National Capital Region (NCR) would not fan inflation and would give the Bangko Sentral ng Pilipinas (BSP) enough room to keep its accommodative policy stance to support the economy.

BSP Governor Amando M. Tetangco Jr. said in a mobile phone message that the salary hike approved by the Wage Board for workers in NCR was broadly similar to the P25 increased factored by monetary authorities in its latest inflation forecasts for this year and next year.

“This favorable inflation outlook provides us with policy space to support non-inflationary growth, given the still challenging global economic and financial conditions,” Tetangco stressed.

It would be recalled that the central bank’s Monetary Board slashed its inflation forecast to 4.7 percent instead of 5.1 percent this year and to 3.6 percent instead of 3.7 percent next year on the back of lower oil prices, stable commodity prices, cheaper power and water rates as well as the stronger peso.

“On this basis, baseline forecasts of manageable inflation pressures for 2010 and 2011 could likely hold,” the BSP chied added.

For his part, BSP Deputy Governor Diwa Guinigundo said the amount approved by the Regional Tripartite Wages and Productivity Board was within the increase assumed by monetary authorities announced last June 3.

“Amount is within our wage assumption. Hence, we keep our forecast of 4.7 percent and 3.6 percent for 2010 and 2011,” Guinigundo said.

The BSP has set an inflation target of 3.5 percent to 5.5 percent this year and three percent to five percent for next year from 3.2 percent in 2009.

The increase would translate to a take home pay of P404 for workers in Metro Manila from P382. The Trade Union Congress of the Philippines (TUCP) filed a petition for an across-the-board wage increase of P75.

The BSP recently decided to keep its key rates at record low for eighth consecutive policy-setting meetings since July last year amid the ongoing debt turmoil in Europe, the growing tension between North and South Korea, and the stronger-than-expected GDP growth in the first quarter of the year.

Monetary authorities slashed its key policy rates by 200 basis points between December of 2008 and July of 2009 to cushion the impact of the global economic meltdown. This brought the overnight borrowing rate to a record low of four percent and the overnight lending rate to six percent.

Apart from keeping its key policy rates unchanged, the BSP also decided to put on hold further withdrawal of liquidity enhancing measures.

Since Jan. 28, monetary authorities phased out liquidity enhancing measures that were implemented way back in November 2008 in light of the gradual global economic recovery

Crisis-related measures that were tweaked included the increase in the rate on a short-term lending facility to four percent from 3.5 percent, the reduction of the peso rediscounting budget from P60 billion to P40 billion and further to pre-crisis level of P20 billion, the restoration of the loan value of all eligible rediscounting papers to 80 percent from 90 percent of the borrowing bank’s credit instrument, and the restoration the non-performing loan (NPL) ratio requirement of two percentage points from 10 percentage points. –Lawrence Agcaoili (The Philippine Star)