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