By LEE C. CHIPONGIAN
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said that despite threats of external shocks such as from current tensions between the US and Iran, the Philippines has enough buffers to withstand economic upheavals and unexpected events.
“The Philippine economy stands in a position of strength and resiliency, with ample buffers to weather both domestic and external headwinds,” Diokno told members of the Rotary Club of Manila. He noted the better-than-expected third quarter GDP of 6.2 percent in 2019 and nine-month growth rate of 5.8 percent.
Diokno reiterated that “(the) Philippines is poised to remain among the fastest growing economies in the region and the world. Similar with other countries, the (domestic) economy is exposed to global headwinds and some domestic risks.
But we are optimistic that robust domestic demand and healthy external payments position will continue to support our economy and serve as buffers against external headwinds.”
He added that the current manageable inflation environment of 2.5 percent average end-of-year which is within the two-four percent government target until 2022, as well as the financial system’s ample liquidity to back up the increased economic activity for a nation that keeps on growing, bodes well for the growth sustainability. Also, he noted that the country’s foreign exchange reserves remain strong at $87 billion and giving support to the peso which is still “broadly stable”.
Diokno said the BSP “stands ready to use all possible tools to address any external and domestic shocks.” But, he emphasized, “the BSP is only a piece of this puzzle. An appropriate mix of monetary, fiscal, and other structural policies is crucial in achieving the government’s macroeconomic objectives of strong and sustainable growth.”
For now and over the medium term, the BSP chief said the country “has sufficient policy space, both monetary and fiscal, to deal with external shocks and their spillovers to the domestic economy.”
“We experienced a confluence of steady growth as well as low and stable inflation last year. With that ideal combination, we are cautiously optimistic that 2020 will be an even better year for our economy amidst the lingering sluggish global growth,” said Diokno.
Last year, the BSP reduced interest rates by 75 basis points (bps) amid a stable inflation environment and cut banks’ reserve requirement ratio by 400 bps to infuse more liquidity for bank lending, foreign exchange purchases and other financial requirements.