Philippines faces ‘encouraging’ conditions — BSP
A PICKUP in global economic expansion should be “encouraging” for emerging markets like the Philippines, the central bank chief said in a recent speech, with improving cross-border trade particularly expected to support the country’s growth momentum.
Bangko Sentral ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. said the pickup in global economic activity bodes well for the Philippines, with a recovery in external demand seen to augment and diversify sources of growth for the economy.
“We are optimistic that the Philippine economy will continue to make good progress towards achieving its goals. Economic ex- pansion is forecast to continue to pick up in 2017 due to the robust growth in the services sector and improved external trade conditions,” Mr. Espenilla said in a speech during the Oct. 13-15 Annual Meetings of the International Monetary Fund (IMF) and the World Bank in Washington, D.C.
“[A] dynamic emerging market like the Philippines has reason to look to the future with cautious optimism.”
Mr. Espenilla joined monetary and finance officials from memberstates of the multilateral lenders for the latest biannual joint meeting.
The BSP chief previously said that the government’s 6.5-7.5% economic growth target for the year remains “attainable,” noting that strong consumption and resurgence of manufacturing will propel expansion faster. These favorable conditions are supported by low inflation and a “solid” banking system, Mr. Espenilla said.
Philippine gross domestic product expanded by 6.4% last semester, with state economic managers expecting a faster turnout this second half as more infrastructure projects are rolled out.
Finance Secretary Carlos G. Dominguez III said separately that the Philippines is “aspiring to achieve a growth rate of seven percent this year and through the medium term,” which would be doable given increased investments in infrastructure and a young, skilled workforce — all in a sound monetary policy environment.
He also sought to allay concerns over increased political noise in the country, saying: “Philippine politics is habitually turbulent.”
“Fortunately, there is always more sound than substance in the apparent turbulence,” Mr. Dominguez added.
“We are confident in sustaining the stability and sound governance that are preconditions to progress. The present leadership is unrelenting in realizing administrative reforms and fighting corruption.”
The IMF sees a 6.6% growth for the Philippines this year, which if realized will be close to the low end of the government’s growth target. The pace will be slower than the 6.9% clocked in 2016, but will allow the Philippines to remain a growth leader in Asia.
Global output is seen to pick up faster to 3.6% this year and 3.7% for 2018, according the IMF’s World Economic Outlook released last week.
“Emerging market and developing economies will continue to account for the bulk of global growth,” the Intergovernmental Group of Twenty- Four said in a statement after the memberstates met in the United States last week.
Rising protectionism, the sudden tightening of global financial conditions, rollback of regulatory reforms and geopolitical risks remain as the key risks to growth, the group noted.
Mr. Espenilla described global growth as “fragile” but on track to recovery: “With global growth now expected to pick up in 2017 and 2018, the improving outlook on economic activity, investment, manufacturing and trade has supported a recovery in commodity prices and reduced disinflationary pressures.”
Price increases of basic goods and services are expected to remain manageable in the Philippines, with the central bank projecting inflation to settle within the 2- 4% range annually from 2017 to 2019, Mr. Espenilla said.
Inflation averaged 3.1% as of end- September, a tad below the central bank’s 3.2% forecast average for the entire year.
‘A LOT OF EXCITEMENT’
Monetary regulators also zoomed in on financial technology at the IMF meetings last week, as they stressed the importance of balancing convenience and security with emerging payment schemes.
“There is a lot of excitement about Fintech,” IMF Managing Director Christine Lagarde was quoted as saying in a statement.
“How much is real, how much is hype? We cannot be sure, but we know that digital currencies, new models of financial intermediation and artificial intelligence will change the way we do our job,” she added.
“Our key message is that it would be wise for central bankers and regulators to prepare for the potential benefits and challenges of Fintech.”
Mr. Espenilla said the BSP remains committed to ramp up cybersecurity measures as it counts on increased digitization to get more Filipinos to use formal financial channels for payments, settlements and lending. —