Economists: PH still needs to push local consumption
Philippines still needs to encourage further domestic consumption, and promote growth in agriculture to regain footing alongside with the rest of the world.
These are just few of the forecasts made by the country’s renowned economists, Amando M. Tetangco Jr., former Governor of the Bangko Sentral ng Pilipinas (BSP) and Dr. Cielito F. Habito, an economics professor at the Ateneo de Manila University and former Secretary of the National Economic and Development Authority, during the recently concluded Bankers Association of the Philippines (BAP) 1st BAP CEO Forum 2022 last July 21 — a quarterly gathering of executives in the banking sector to discuss local and global finance and economic issues relevant to the banking industry.
The economists also suggested that the Philippines should take note of good practices of its fellow ASEAN nations in achieving economic strength.
In his presentation, Tetangco cited three pressing storm clouds: rising debt across countries, surging global inflation and policy normalization in advanced economies.
“The dangerous trend of increased debt is present domestically and internationally. The slowdown of economic activity, combined with increased expenditure payout, has forced governments, including the Philippines to borrow from domestic and foreign sources,” Tetangco said.
“Domestically, a plan for fiscal consolidation to improve the debt situation needs three key factors - continuous growth, balance in managing the effort to reduce fiscal deficits without undermining the recovery and sustaining
the program to bring down debt ratios which can take years,” Tetangco noted adding that clearly communicated medium-term plans based on specific measures and backed by strong fiscal frameworks are keys to establish credibility.
On the banking system, Tetangco observed that earlier reforms allowed banks to enter the pandemic in a position of strength and helped the system absorb the headwinds while remaining sound and robust. In fact, banks’ capital adequacy and liquidity ratios have improved.
“The sound financial system enabled the effective intermediation of funds to productive sectors as outstanding loans quickly recovered after a brief period of contraction,” Tetangco said.
“Nevertheless, challenges remain and banks need to be resilient, more technologically advanced, more sustainable and inclusive than ever before,” the former BSP chief pointed out.
Tetangco concluded that in addressing the complex nature of the risks that continue to confront us, a whole-ofgovernment approach which calls for greater coordination of fiscal, monetary, and financial policies are needed.
Meanwhile, Habito, who discussed was about “Back to Basics: The Way Forward for the Philippine Economy,” he went into detail on ways to improve the current macroeconomic environment, along with his projections for the economy with the new administration.
“We must put people first, maximize our land and water resources, and reshape our services,” Habito said.
Habito also gave a brief summary of his observations using his PiTiK (Presyo, Trabaho, Kita) method for the current performance of the economy. With this method, Habito noted trends such as increased prices of commodities (Presyo), a boom in the agricultural and informal economy (Trabaho), and the rise of financial technology among consumers (Kita).
Habito emphasized the importance of the agricultural sector, noting it has seen growth during this pandemic while other industries underperformed.
“We must look towards our ASEAN brothers in terms of how we deal with how we use our natural resources by recognizing the importance of agriculture in the generation of jobs and export products,” he continued.
“The backbone of our domestic growth has been the agricultural sector and it’s time for the Department of Trade and Industry to recognize it,” Habito added.
In his opening remarks, BAP President Antonio C. Moncupa, Jr. hailed the resumption of the forum, which was held last 2018 when it was called the Bankers’ Assembly.
“It is designed for CEOs and senior officers of BAP member-banks and aims to provide an opportunity to interact with thought leaders on relevant issues affecting the economy and banking [industry],” he said.
Moncupa also highlighted the various headwinds affecting the Philippines.
“I am pretty sure we are all thinking about how the economy — and consequently the banks — will fare in the face of lingering COVID-19 virus, the global inflation, the resulting monetary tightening cycle, the Ukraine war, the recession talk in major economies that is getting louder by the day, the uncharacteristically negative outlook for China, the muscular dollar, and the expected slowdown in world economic growth,” Moncupa noted.