Philippine central bank says need to strengthen domestic demand

MANILA: The Philippines needs to strengthen domestic demand to make up for weaker trade given the bleak economic picture painted by the US Federal Reserve, Bangko Sentral ng Pilipinas Governor Amando Tetangco said.

Tetangco said the Fed's decision to keep interest rates near zero for at least two more years signalled interest rate differentials would continue to favour emerging markets.

That could fuel more capital inflows into emerging market economies, but the two-year timeframe set by US policymakers should give the Philippines "monetary policy space."

"What we need to work double time on is strengthening domestic demand to make up for potentially slower trade, given the more negative growth outlook in the US and Europe," Tetangco said in a mobile text message.

"On part of BSP, we will continue to monitor developments to ensure such improvement in aggregate demand occurs in non-inflationary environment," Tetangco sai.

Copyright Reuters, 2011