The Bangko Sentral ng Pilipinas (BSP) said it will do all it can to ensure full recovery in 2022, calling for “cautious optimism” after the government downgraded its 6-7 percent GDP forecast this year to 4-5 percent, taking in the impact of the current Delta variant lockdown.
“There is basis for cautious optimism, especially with the accelerated vaccination program,” according to the BSP. “We will continue to do what is needed for as long as necessary—until there is hard evidence of full recovery,” it added in a statement late Wednesday, August 18.
The BSP noted that business and consumer confidence are slowly improving on the back of private investments and rising consumption, and this has helped the second quarter recovery. “As we vaccinate more Filipinos, business and consumer sentiment will further improve, supporting overall economic growth,” said the BSP.
The BSP has kept the benchmark policy rate at a record low of two percent since November 2020 in aid of an economy trying to pull itself out of a pandemic recession. This proved helpful with GDP recovering in the second quarter with a significant 11.8 percent growth.
The BSP said it will support GDP recovery and to “bring the economy back to its pre-pandemic trajectory toward a New Economy that is stronger, more technology-driven, more sustainable, and more inclusive than ever before.”
On Wednesday, the inter-agency Development Budget Coordination Committee (DBCC) downgraded its growth assumption for this year, citing the return to a two-week Enhanced Community Quarantine to contain the spread of the COVID-19 Delta variant.
The DBCC in the same meeting kept the growth assumptions of 7-9 percent for 2022, and 6-7 percent for 2023 and 2024.
“The road to full recovery remains bumpy,” said the BSP. “Considering that our GDP is rising from a period of contraction last year until the first quarter of this year, a positive full-year estimate for 2021 means the economy remains on the path to recovery. Also, the Philippines’ medium- to long-term growth prospects remain bright,” it added.
The BSP has been implementing a non-inflationary, low interest rate environment to support and ensure a sustainable recovery. This requires a balancing act of money and credit growth, and combining fiscal stimulus and low interest rates in a non-inflationary package.
BSP Governor Benjamin E. Diokno has repeatedly said that BSP’s accommodative monetary policy stance will continue to be appropriate, given the inflation outlook which is expected to decrease below four percent and to stay within the two-four percent target band by the end of 2021.
The BSP is one of the first central banks in the region to cut policy rates by a cumulative 200 basis points, and it also injected P2.2 trillion fresh liquidity in the financial system to support an economy in recession.