Omicron virus will not derail GDP growth momentum – BSP chief

Published January 13, 2022, 3:41 PM

by Lee C. Chipongian

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said the highly contagious Omicron variant which has stalled economic activities in the first few weeks of January, will not impact on the GDP growth momentum that has been sustained since the second quarter of last year.

BSP Governor Benjamin E. Diokno

Diokno made this assurance in two events on Thursday, Jan. 13.

“Our position is that despite the recent variant of the virus, we will still hit our projected growth of 7-9 percent for this year,” he told members of the Management Association of the Philippines during its virtual 73rd inaugural meeting.

Diokno said the wildfire-spreading variant is “mild and less lethal”.

“We hope the variant will be gone by middle of February or at the latest is March, so that gives us confidence that we will hit our growth target of 7-9 percent this year and 6-7 percent for the next two years,” said the BSP chief.

During his weekly online press briefing, Diokno reiterated that he is not worried about Omicron’s widespread since the “new virus is more contagious but less virulent so we do not expect that to affect too much our forecast for this year.”

“We are expecting the problem will be solved at the latest (within) the first quarter of the year. We don’t expect that to be a major downer as far as the growth targets are concerned,” he told reporters.

Diokno on Thursday reminded investors and the market that GDP has shown stronger signs of recovery. After five consecutive quarters of negative growth, the economy bounced back with growth of 12 percent in the second quarter of 2021 followed by 7.1 percent in the third quarter, he noted.

He also cited improved labor conditions while inflation has decelerated to 3.6 percent last December, bringing the average rate to 4.5 percent for 2021. “For this year and next, we see inflation easing back to within the target range (of two-four percent,” he reiterated.

Diokno said earlier this month that while there will be challenges ahead, the government is making good progress in terms of economic recovery, and that there is sufficient support for the country’s recovery this year which will come from expected economic developments.

He also said that the management of risks, the expected revitalization of key industries from government policy support and structural reforms, as well as the resumption of global economic activities, should help the local economy move toward a steady recovery path.

Diokno has always said that the BSP is responsible for ensuring that there is sufficient liquidity in the financial system and to prevent the tightening of financial conditions and financial disintermediation.

He also said that BSP will aim to gradually reduce policy stimulus and it will be very careful not to unwind either too early or too late. Factors that will play a crucial part are domestic demand, the virus transmission and how fast and efficient is the vaccine deployment.

“Amid the health crisis, we have begun to see the dawn of recovery. Bright spots have emerged,” Diokno told MAP members.