BAP says economy sound, growth target within reach

The Bankers Association of the Philippines (BAP) has expressed confidence that the economic growth target this year of 5-6 percent would be achieved, given the country’s positive macroeconomic fundamentals.

“The economy may still reach the target, and may even reach 6 percent, the high end of the target range, if the government would indeed spend more in the second half as it said it would,” BAP president Aurelio Montinola III told reporters Wednesday.

Montinola, who is also president of the Bank of the Philippine Islands (BPI), added that remittances, which largely fuel consumption of Filipino households, are expected to remain robust this year.

Remittances, besides supporting consumption of basic goods, also help spur demand for big-ticket items, such as automobiles and residential properties. Higher demand for these items normally goes with an increase in demand for bank loans.

The central bank reported this week that remittances amounted to $1.74 billion in June, the highest recorded for a month, rising by 7 percent from $1.62 billion in the same month last year.

Montinola also said that the downgrade of the US credit rating does not have a significant impact on the Philippine banking sector.

Montinola explained that although banks are exposed to dollar-denominated instruments, they have diversified investments over the years and so the impact of the downgrade would be minimal.

“There is virtually no effect on us [Philippine banks]. Our NPLs [non-performing loans] remain low and are expected to stay low,” Montinola said.

In the first quarter, the economy, measured in terms of gross domestic product, grew by 4.9 percent from a year ago.

The government said that given its commitment to accelerate spending in the second half, it is keeping the 5- to 6-percent growth target for the year.