Fo­cus on gov’t ac­tions, not words, BSP Chief Tetangco tells in­vestors

Manila Bulletin - - Front Page - By KAREN LEMA and MARTIN PETTY (Reuters)

The Philip­pine econ­omy is on the right track un­der its new govern­ment, and in­vestors jit­tery about Pres­i­dent Ro­drigo Duterte's fierce rhetoric should fo­cus on ac­tions rather than words, Cen­tral Bank Governor Amando Tetangco said in an in­ter­view.

He said the cen­tral bank was ready to mod­ify its mon­e­tary pol­icy stance if nec­es­sary, but saw no ur­gency to do so be­cause there is man­age­able in­fla­tion and strong growth, which should be sus­tained on the back of the govern­ment's re­form plans and pol­icy con­ti­nu­ity.

"What is im­por­tant is for one to be able to dis­cern be­tween what is noise and what is fact," he told Reuters in an in­ter­view when asked about con­cerns about Duterte's mer­cu­rial style.

"The cur­rent ad­min­is­tra­tion has com­mit­ted that it will con­tinue or fol­low the re­forms, the poli­cies and the re­forms that have been put in place by the pre­vi­ous ad­min­is­tra­tion so this re­ally sug­gests there will be a con­ti­nu­ity.

Tetangco added: "The deci­bel level may have risen but if you look at the facts, the econ­omy is still do­ing very well."

Duterte's trade­mark out­bursts have rat­tled in­vestors, par­tic­u­larly those from the United States, a coun­try Duterte has a ma­jor grudge against. He has told Amer­i­can firms un­happy with his anti-US tirades to pack their bags, and wants US troops out of the Philip­pines for good.

On in­ter­est rates, Tetangco said ad­just­ments could be made if needed but there was suf­fi­cient space both on the mon­e­tary and fis­cal side. The govern­ment, he said, could ramp up spend­ing, par­tic­u­larly on in­fra­struc­ture, for which the Philip­pines had "a lot to catch up on.”

The bank – the Bangko Sen­tral ng Pilip­inas – has not tin­kered with its mon­e­tary pol­icy since it raised rates by 25 ba­sis points in Septem­ber, 2014. It set the main rate at 3.0 per­cent when it moved to an in­ter­est rate cor­ri­dor frame­work in June last year to make pol­icy trans­mis­sion faster and more ef­fi­cient.

Some econ­o­mists be­lieve the cen­tral bank will have to raise rates this year as in­fla­tion edges higher. No­mura ex­pects a cu­mu­la­tive 50 ba­sis points of hikes in the first half of 2017.

Tetangco said the Philip­pines would "not go against the fun­da­men­tal trend" of its peso cur­rency and the bank had tools to han­dle fi­nan­cial mar­ket volatil­ity that could stem from US rates hikes, do­mes­tic pol­i­tics and pro­tec­tion­ist poli­cies that could come un­der a new US ad­min­is­tra­tion.

"What is needed is to man­age this volatil­ity be­fore it gets too prob­lem­atic,"

he added.

In rare com­ments about the pres­i­dent, Tetangco said Duterte's dra­matic for­eign pol­icy up­heaval had been mis­un­der­stood. Duterte's in­tent, he said, was to sup­port the econ­omy by di­ver­si­fy­ing trade and in­vest­ment part­ners, rather than shut the door on long­time ally the United States, with which ties would only ex­pand.

"What they call (a) pivot to China does not nec­es­sar­ily mean we are piv­ot­ing away from the US," he said, adding it was "not a zero-sum game."

Tetangco, a vet­eran tech­no­crat widely praised for his stew­ard­ship of one of the world's fastest grow­ing economies, re­fused to be drawn on whether he was con­sid­er­ing Duterte's of­fer to ex­tend his ten­ure for a third, six-year term.

He said cen­tral bank gover­nors were lim­ited to two terms only un­der the law. His sec­ond term ends in July.

"That's a hy­po­thet­i­cal ques­tion," he said.

The "best can­di­date" to suc­ceed him, he said, "should be some­one with cen­tral bank­ing back­ground."


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