Philippine economy on its way to recovery, says BSP Governor Diokno
Country’s gross international reserves hit US$105 billion, says BSP Governor Diokno
MANILA – Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno sounded optimistic the country’s economy is bound to recover this year after the COVID-19 pandemic had “debilitating impact on lives, livelihoods and inequality.”
Speaking before the Tuesday Breakfast Club, the former Economics professor and twice Budget and Management Secretary, Governor Diokno said had it not been for the strong macroeconomic fundamentals before the onslaught of the pandemic, the country’s economy could have taken a stronger beating.
He recalled the country had manageable inflation, strong and resilient banking system, a prudent fiscal position and substantial level of gross international reserves mitigated the economy from the impact of the crisis.
“The Monetary Board cut the policy rate by 200 basis points and the reserve requirement by another 200 basis points,” he said. He added the twin action resulted in the lowest interest rates in the country’s history.
In addition to this, they adopted what he said was a wide range of measures that arrayed P2 trillion which is equivalent to about 10 percent of the 2019 GDP.
Governor Diokno said the country’s gross international reserves or GIR hit an “all-time high” of US$105 trillion, which is three times the import requirements of the country as of end November 2020.
The peso was supported by the gradual recovery in external accounts such as foreign direct investments (FDI) and overseas Filipino remittances. The credit ratings the country received helped the country access financing with low-interest rates and longer repayment period.
Governor Diokno added they worked with the country’s economic team and the Congress regarding the extended grace periods for debt payments in May and September.
He also said bad debts remain manageable with the non-performing loans (NPLs) of banks settling at 3.7 percent as of October 2020. He also acknowledged the people’s adaptation to digitalization and financial technology.
Looking forward, Governor Diokno said hard macro and micro economic data reveal that the worst is over.
“Based on available information, we expect the economy to bound back by 6.5 to 7.5 percent this year,” he said.
This will be achieved with the further easing of restrictions, improvements in the healthcare system, and the full cooperation from everyone to keep viral transmission under control.
“With the expanding economic activity, we are also expected the unemployment rate to fall from a record-high 17.6 percent in April – the height of the lockdown – to 7 percent in 2021,” Governor Diokno added.
However, he added resilience will never be enough as he called on everyone to collect and harness lessons from the COVID-19 experience to keep everyone prepared should similar conditions take place in the future.
He said the crisis “will usher in a new economy, one that is more robust, more inclusive, more technologically savvy.”
Considering the loans the Philippines incurred with the onslaught of the COVAID-19, Governor Diokno said the country will be able to settle its foreign obligations because of the country’s significant gross international reserves and due to the longer repayment period, which he said was between 30 to 40 years at significantly low interest rates.
Asked how a possible COVID-19 second wave would impact the country’s economy, Governor Diokno said it may be far-fetched because the country has prepared for the needed vaccines to stem the tide of the pandemic. (Melo M. Acuña)
Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno (Screen grab from his address before the Tuesday Breakfast Club/Melo M. Acuna)