BSP Confident in the Full Recovery of the Philippine Economy
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno stated that the Philippines is on its way to full recovery from a recession due to the COVID-19 pandemic, despite the recent surge of infections in China and the ongoing Russian-Ukrainian war.
In an interview with CNN, Diokno mentioned that the Philippines is expecting a fast gross domestic product (GDP) growth of 7% to 9% this year after ascending from the pandemic-induced recession with a 5.7% expansion the previous year.
The country went into recession in 2020 with a 9.6% contraction as the economy stopped due to the strict implementation of COVID-19 quarantine protocols.
Diokno noted, “The Philippines is actually on its way to a full recovery from the recession in 2020.”
Diokno cited to the anchor of Quest Means Business that the effects of the conflict between Russia and Ukraine were indirect, through higher petroleum prices and eventually faster inflation.
Diokno explained, “We have factored that in our most recent analysis, and it will adjust upward our inflation to maybe around 4.3%.”
Inflation hastened to a six-month high of 4% in March, the upper end of BSP’s 2 to 4% target from the 3% in January and February.
BSP sees the inflation to remain high and above the target range in the second half until the first quarter of next year due to higher global petroleum and non-petroleum oil prices.
This could lead the BSP to start normalizing in the second half by hiking interest rates after they kept the record low since 2020 when it delivered an aggressive 200-basis-point rate cut as a part of its COVID-19 response.
Currently, Diokno is in Washington to participate in the 2022 Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group.
Diokno highlighted the country’s controllable inflation, stable banking system, and strong external position in a separate discussion with institutional investors in Barclays, Bank of America Securities, and J.P. Morgan conferences.
After settling at 4.3% this year, Diokno informed investors that inflation might ease back within the 2 to 4% target at 3.6% next year.
Diokno cited that the country’s banking system remained stable throughout the pandemic. In addition, the external position also remained strong, with gross international reserves of $108.5 billion as of end-March.
In 2021, the country’s usual sources of foreign exchange also continued to rise. The remittances from overseas Filipino workers (OFWs) increased by 5.1%, business process outsourcing receipts escalated by 9.5%, and net foreign direct investments grew by 54.2%.
In support of the Philippines’ post-pandemic recovery, BSP carried out extensive measures that unleashed as much as ₱2.3 trillion in the financial system.
Included in a wide range of monetary and regulatory measures are the following:
- Enhancing market confidence and ensuring adequate liquidity and credit;
- Complementing government programs through extraordinary liquidity measures;
- Implementing regulatory and operational relief measures
Diokno cited, “All these have contributed to helping the Philippine economy get back on track in 2022.”
