SOME lenders, including the Bank of the Philippine Islands (BPI), believe the Philippines should do well this year in terms of economic growth and the stability of prices as long as the economic managers keep the five-and-five rule in mind.

BPI President and Chief Executive Officer Aurelio Montinola III stressed this in an interview, saying debt issues hounding the US, the fiscal problems of peripheral members of the European Union, and the price of oil could cause local authorities to overreact.

According to Montinola, the “five-and-five” pertains to anticipated growth of around 5 percent this year in terms of the gross domestic product and to forecast inflation averaging 5 percent.

Crafting policy objectives and program goals with the numbers in mind should enable the economy to deliver growth that benefits the most number of Filipinos without pushing services and goods prices too high.

“I think the five-and-five is still a good projection,” Montinola said of that mixed bag of policy plans and programs seeking to push the economy at a sustainable 5-percent pace while keeping inflation well in check also at around 5-percent.

Thus far, the economy grew by 4.9 percent in the first quarter and seen to have at least sustained the pace in the second quarter.

Growth of up to 8 percent is believed still possible this year under existing conditions.

Inflation was believed to have been brought down within the 5-percent ceiling after the Bangko Sentral ng Pilipinas (BSP) scaled up the banks’ deposit reserves another 1 percentage point higher to remove some of the inflationary liquidity present in the system.

Prior to last week when markets around the world worried over whether US legislators would come around and support the bid to lift that country’s debt ceiling, Philippine inflation was forecast to range above 5 percent during the year and eventually force the monetary authorities to intensify a tightening bias that analysts and market players said should put a damper on the growth potential.

Montinola based his optimism on continued bank lending growth averaging more than 18 percent in the first five months.

He pointed out that BPI itself posted lending growth averaging 16 percent in the first half.

There is risk that the economic managers would overreact and adopt measures tending to dampen what has been achieved thus far in terms of the manageable inflation of 4.2 percent in the first half no matter that more recent events suggesting continued pressure for domestic prices to trend higher.

Montinola said two things are evident at this point.  One concerns the likelihood for continued low interest rates in the US and by extension low interest rates in the Philippines as well, and continued weakness in the US dollar.

These developments could complicate monetary and fiscal management practices and objectives down the line, which is why he urged for caution among policy planners.

In theory, for instance, the BSP could install foreign capital barriers down the line in a bid to manage domestic liquidity levels.

But officials such as HSBC Treasury Chief Arnulfo “Wick” Veloso believe existing policy rates at 4.5 percent for borrowing and 6.5 percent for lending are already at optimal levels.

Veloso said overall growth forecasted at 5 percent or better during the year was built into the decision keeping the policy interest rates steady while soaking on still more excess liquidity from the system with the percentage point hike in the banks’ deposit reserves.

“The events of the last two to three weeks have significantly heightened risks that the rest of the year is going be volatile. It is well for central banks to be cautious,” said Tony Cripps, HSBC president and chief executive officer in Manila and Veloso’s boss.