BSP marks 25 years amid challenges
TWENTY-five years is a long time. Some marriages don’t even make it to the 25th year.
For the Bangko Sentral ng Pilipinas (BSP), celebrating its 25th anniversary is a milestone, but it also marks one of its most challenging times. Inflation, after all is at a five-year high and the country’s current account is expected to widen by the end of the year. The peso, too, has seen better days. The list can go on and on.
But on Friday, inside the glittering Assembly Hall of the BSP, Governor Nestor Espenilla Jr. sought to assuage fears – if any -- of those in the crowd including bankers, businessmen, diplomats, government officials and economic journalists.
He also trumpeted the country’s gains on the economic front.
“Last July 3 marked a full quarter of a century’s dedication to the BSP’s mandates of promoting price stability, financial stability and maintaining an efficient payments system. Tonight, I reiterate these commitments in the context of the BSP’s anniversary theme, ‘Navigating the Future,” Espenilla said.
He said the BSP’s commitment to price stability has supported a balanced and sustainable growth of the economy.
“We have enjoyed 77 quarters of uninterrupted economic growth since the 1997 Asian Financial Crisis. Our six-year consecutive growth of above six percent makes the Philippines one of the fastest growing economies in the world. This growth streak is projected to continue for the medium term despite challenges in the global and domestic economic landscape. Our sound macroeconomic fundamentals and growth prospects have led to positive investor sentiment and have attracted more foreign investments,” Espenilla said.
Addressing the pink elephant in the room, Espenilla – who has been widely criticized for the country’s five-year high inflation of 5.2 percent in June – said the BSP is ready to follow-through on previous actions.
“In the face of rising threats to the inflation target, we hiked policy rates last May and June. We are ready to follow-through to secure our inflation target. The BSP remains firmly committed to its primary mandate of price stability,” he said.
Espenilla indicated the controversial cut in reserve requirements will continue even though it is largely blamed for aggravating inflation.
“Indeed, reducing the RRR to single digit by the end of my term is attainable without compromising effective monetary control. We are ready to resume this initiative next year just as inflation returns to target based on our forecast. We remain firm in our pursuit of structural reforms so that the banking industry remains guided even as you develop your long term strategic plans,” he said.
But inflation isn’t the only challenge, the governor said. Still, the BSP will continue to face the obstacles along the way.
“We stand steadfast and undaunted by the headwinds. Rising global rates. Trade wars. Geopolitical risks. We face unpredictable currents. Distributed ledger. Artificial intelligence. Cyber-threats. We rely on the navigational skills we have honed over the years to manage the constant challenge,” he said.
Moving forward, Espenilla said, the BSP expects further expansion of the banking system, sound asset quality, adequate liquidity and rising capital buffers.
“The trajectory for profit growth will continue, driven mainly by strong growth outlook, upbeat lending activities, product innovations, and more cost efficient and technology-enabled operations,” the BSP chief added.
In all, Espenilla said challenges remain, but he rallied the support of market stakeholders to help the BSP in fulfilling its mandate.
Some of the bankers who braved the rains to attend the momentous occasion included tobacco and airline magnate Lucio Tan, Bank of the Philippine Islands chairman Jaime Augusto Zobel de Ayala, CTBC Bank vice chairman William Go, Rizal Commercial Banking Corp. chair Helen Dee, who attended the bankers’ reception for the first time again after three years.
US Ambassador to the Philippines Sung Kim, touted as the George Clooney of the diplomatic community, also graced the occasion.
From the government side, the no non-sense Securities and Exchange Commission chairman Emil Aquino and SEC commissioner Ephyro Amatong, were also in attendance.
Citizen Amando Tetangco Jr., Espenilla’s predecessor, also graced the celebration, which is just among the many cocktail events he can now attend because of his free time.
Also present were former central bank Governors Jose Cuisia Jr. from February 1990 to July 1993 and Jaime Laya from January 1981 to January 1984.
Indeed, there are a lot of reasons to celebrate the BSP’s quarter of a century of existence. But along with the festivities, monetary authorities must remain vigilant to keep up with the threats and challenges. Otherwise, the BSP’s mostly exemplary performance the past years may suddenly be tainted -- and on its 25th year at that.