by Blogger | Jul 14, 2023 | Business
THE P40 INCREASE in the daily minimum wage in the National Capital Region (NCR), which will take effect on Sunday (July 16), is unlikely to drive inflation beyond the central bank’s target band, the National Economic and Development Authority (NEDA) said.
“We estimate that the inflationary impact from the approved wage order would be minimal and is unlikely to push inflation above the central bank’s (2-4%) target range,” the NEDA told BusinessWorld via e-mail.
The National Capital Region Tripartite Wages and Productivity Board approved a P40 wage hike in NCR, bringing the daily minimum wage to P610 for workers outside the agriculture sector.
The minimum wage was also increased to P573 for those in the agriculture sector, service retail establishments with 15 or fewer workers and manufacturing companies with less than 10 workers.
Headline inflation slowed for a fifth straight month in June to 5.4% from 6.1% in May, as food and transport prices eased. Year-to-date inflation settled at 7.2%.
The BSP sees inflation returning to the 2-4% target range by October before averaging 5.4% this year.
However, NEDA said that a wage hike without an increase in labor productivity may drive up production costs that would be passed on to consumers through higher prices of goods and services.
It also noted that a wage hike in NCR would usually lead to other regions following suit, “which may amplify the overall economic impact.”
by Blogger | Jul 14, 2023 | Business
In a discussion paper titled “Does Exchange Rate Volatility Matter for Economic Growth,” BSP researchers said exchange rate volatility can lower growth in some economies like the Philippines, but only in the short term.
“In the short run, exchange rate volatility exerts a negative impact on some economies and a positive impact on others. A percentage change in exchange rate volatility decreases economic growth by about 0.14% in China, 0.19% in Singapore, and 0.4% in the Philippines,” the BSP researchers said.
The study tackled the effects of volatility in the foreign exchange (FX) markets of 11 Asia-Pacific economies from 2002 to 2022.
However, this negative impact on economic growth in China, the Philippines, and Singapore dissipated in the long run, BSP researchers said.
“This may imply that measures used by these economies to respond to exchange rate volatility could be effective and that other factors are more important for economic growth in the long run,” they said.
One of the most known episodes of FX volatility in the Philippines occurred last year, when the peso hit a record low of P59 against the greenback in October, amid the US Federal Reserve’s aggressive tightening.
The BSP hiked policy rates to avoid a narrower interest rate differential with the US Fed and used its dollar buffers to mitigate the volatility in the foreign exchange market.
From March 2022 to June 2023, the Fed raised its key rates by 500 basis points (bps) to 5-5.25%, while the BSP hiked by 425 bps to 6.25% from May 2022 to March 2023.
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