PH recovery has 'sufficient support' — Diokno

Published December 1, 2021, 12:24 PM

by Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the BSP and other sectors of the government will ensure the expected speedier recovery in 2022 will be fully supported by adequate policies.

BSP Governor Benjamin E. Diokno

“Considering the recent economic developments and significant improvement in vaccine rollout, we are optimistic that there is sufficient support for the country’s recovery this year and in the near term,” said Diokno on Wednesday, Dec. 1, Arangkada Philippines Forum.

Diokno said the “management of risks through the calibrated reimposition of lockdown restrictions, the expected revitalization of key industries due to government policy support and structural reforms, and an improving global economy should help the Philippine economy to recover in 2021 and accelerate in 2022.”

The BSP expects an above-target GDP expansion for this year or six percent against a 4-5 percent government target. For 2022, Diokno also projects a GDP growth of at least seven percent or higher, within the 7-9 percent target set by the inter-agency Development Budget Coordination Committee.

Diokno is confident that macroeconomic fundamentals remain sound despite a year and a half of COVID-19 pandemic. It’s seen in the latest GDP growth which he said suggests that economic rebound is underway.

“Strong growth is expected in 2022 (while) the currently elevated inflation is due to transitory factors. Inflation remains well-anchored,” he said. The BSP expects November inflation, which will be announced next week, will drop to below four percent for the first time since January this year. For the first 10 months, the inflation average was at 4.5 percent, above the two-four percent target for 2021.

Diokno said amid a low, two-percent negative real rate environment versus high inflation, banks have remained healthy capital-wise despite that bad loans have increased.

“Lower policy rate was meant to influence banks to cut their own lending rates, thereby promoting credit- taking activities. Meanwhile, lower reserve requirement increased the volume of loanable funds,” said Diokno. The RR rate has been reduced from 14 percent in 2019 to 12 percent in 2020.

After five quarters of GDP declines, real GDP grew by 12 percent in the second quarter and 7.1 percent in the third quarter. For the first three quarters of 2021, the economy grew an averag of 4.9 percent which was within the government’s target of 4-5 percent for 2021.

“Economic activity is vastly improving. Yet, the overall momentum of the economic recovery remains foggy as long as a big part of the population remains unvaccinated and there is still a possible emergence of more virulent variants. Nevertheless, the sustained implementation of targeted fiscal initiatives, as well as the acceleration of the vaccination program, should help boost market confidence and economic recovery,” said the BSP chief.

Diokno reiterated that the re-imposition of stricter lockdown measures in key areas affected business confidence but he also noted that businesses are more optimistic in the last three months of 2021 due to the holiday season, and in the next 12 months. Consumer sentiment also continued to improve due to expectations of availability of more jobs, additional or higher income, and effective government policies and programs, particularly in addressing COVID-19-related concerns, he said. As of this week, the number of COVID-19 new cases have dropped below 500, the lowest since July last year.