AFC, 24 years after

Published July 9, 2021, 7:00 AM

by Fil C. Sionil

This Sunday marks 24 years since the 1997 Asian financial crisis (AFC) brought the regional economies spinning down in a trance. 

Former Bangko Sentral ng Pilipinas (BSP) Governor Amando “Say” Tetangco, Jr., in my previous exchanges with him, admitted that “it was the most challenging moment” of his career as a central banker. He was managing director in charge of treasury back then. 

Days prior to the declaration of the de facto devaluation, the peso was gyrating wildly against the almighty US dollar, a condition which I surmised gave all the regional central bankers jitters and sleepless nights. 

From his view point, Gov. Say explained AFC was caused by the Asian countries suffering from significant vulnerabilities. The regional economies had been “growing rapidly in the 1990s, bolstered by high rates of investment. With stable exchange rates and with foreign interest rates below domestic interest rates, foreign loans became a major source of funding to finance even long-gestation investments.”

The result was a ”mismatch in currency and maturity” that led to “a buildup of imbalances. This eroded market confidence that eventually manifested itself in exchange rate pressures.” From P21 to a dollar, the local currency plummeted to P27.

Thus, on July 11, 1997, then BSP Governor Gabriel C. Singson reluctantly declared de facto devaluation to arrest the sustained attack on the local currency. Walking down memory lane, I distinctively recalled the anxiety the BSP Press Corps endured the day before while waiting for Gov. Sing (our term of endearment for him) to return from his meeting with President Fidel V. Ramos and Executive Secretary Ruben Torres. Under the law, BSP has to inform the Palace on any major policy decision.

There was no Internet then, but competitive as we were, imagine the disappointment we suffered when we heard that the executive secretary spilled the beans of the BSP action to the Singapore Strait Times correspondent here despite the agreement that such major policy announcement should emanate from BSP. Frustrated was an understatement.

Despite the relatively laggard economic conditions we are in at the moment courtesy of the pandemic, with the stock market going on a rollercoaster ride, plus the natural (Taal restiveness) and man-made (the C-130 crash where a good number of our military frontliners died) and geopolitical situation, the country remains in a better shape compared to then. The Philippines has gone a long way from the “Sick man of Asia” to an investment grade economy.

Taking stock of the then and now as Gov. Say puts it, 24 years after the crisis, “now we have a more flexible exchange rate, stronger banking system, and high international reserves. We are in a much better position at present.”

Seasoned bankers Roland Avante, president of the Philippine Business Bank, and Eugene Acevedo, president of RCBC, likewise agree that structurally, the Philippines is “in a stronger position” now. Both were deep into the treasury operations back then.

Although, from the view point of our gross national product,  it “looks bad but it’s driven by the pandemic and all countries are affected though we are last in response” opined Mr. Roland as he laments the dire need to level up and improve, especially in the inoculation program as authorities decide to open up more service-oriented businesses.  

Thus, it is a welcome move for the private sector, the big companies such as diversified food and beverage conglomerate San Miguel Corporation, Metro Pacific Investment Corp. and ICTSI, which have joined hands with the government in order to inoculate their workers and their families. 

On a personal note, I received my first jab, courtesy of San Miguel, which has always been a forever supporter of the members of the Economic Journalists of the Philippines. My deep appreciation and salute to San Miguel President Ramon S. Ang and his “Malasakit Team.”

The wheels of business, thus far, churned positively. Hoping, this will be sustained.

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