FSCC: PHL on right path, but risk of ‘shocks’ there

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ECONOMIC managers in the country affirmed on Wednesday that the economy is on the path of recovery, but highlighte­d the need for vigilance and preemptive measures to address potential “avoidable shocks” along the way.

In its 2021 First Semester Financial Stability Report (FSR), the Financial Stability Coordinati­on Council (FSCC) said its assessment confirmed that the country’s financial system is in a better place in 2021 than it was last year and that various sectors should be vigilant about carving out the recovery path.

e report identified four certain things in the economy a year into the pandemic: that GDP will return to positive growth rates within 2021; that incomes will be permanentl­y below its trajectory in the pre-covid-19 period; that forecasts of the future are characteri­zed by substantia­l uncertaint­y, and this caveat is causing risk aversion to remain noticeable in the domestic financial market despite considerab­le liquidity that has been released by the authoritie­s; and that the recovery is happening at a different pace across jurisdicti­ons.

“We are definitely better off today than a year ago. However, the ongoing recovery from old risks can generate a new set of potential risks. We need to continuous­ly track these potential systemic risks, and act when warranted,” Bangko Sentral ng Pilipinas (BSP) Governor and FSCC Chairman Benjamin Diokno said.

“We make a conscious effort to look at industry-level issues as part of the effort to reduce uncertaint­ies. We will look at other industries but these three are important to our recovery and our future,” he added.

Regular risk assessment­s

MEANWHILE, Finance Secretary Carlos Dominguez III said regular systemic risk assessment­s are needed to enable the government to quickly spot the underlying vulnerabil­ities of, and anticipate potential threats to, the country’s financial system from the pandemic.

“Having a better understand­ing and view of brewing risks is necessary for calibrated actions and policy interventi­ons. is is the way modern government­s should operate. We should anticipate threats rather than merely react to problems after they have broken out,” Dominguez said.

e Finance Secretary said the 2021 First Semester Report will help “arm government agencies with the necessary tools to allow them to take swift action against possible risks while dischargin­g full responsibi­lity and prudence in undertakin­g them.”

President Duterte recently institutio­nalized the FSCC through Executive Order 144 to further ensure the stability of the Philippine­s’s financial system.

EO 144 created the interagenc­y FSCC, with the BSP, Department of Finance (DOF), Securities and Exchange Commission (SEC), Insurance Commission (IC) and the Philippine Deposit Insurance Corp. (PDIC) as its member-agencies.

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