MANILA, Philippines—The rich world’s recent commitment to lift global growth back to pre-crisis levels should provide an extra boost to the Philippines’ own boom, although officials remain watchful of any excessive risk-taking that could lead to renewed instability.
On the local front, the country’s top monetary official said the government should sustain reforms that have helped separate the Philippines as one of the few countries that have “kept their houses in order.”
“As they say, the tide should lift all boats. In the meantime, it is important that we keep our own house in order,” said Governor Amando Tetangco Jr. of the Bangko Sentral ng Pilipinas (BSP).
“Although there were no specific steps mentioned, the G20’s commitment to pursue growth should be positive for the Philippines,” he said.
His statements followed a statement published by the Group of 20 Finance Ministers and Central Bank Governors, more commonly referred to as the G20, committing to lift global growth by at least 2 percent in the next five years.
This commitment among the world’s 19 of the world’s major economies plus the European Union as a whole is expected to translate to an equivalent of $2.25 trillion in additional economic output.
The statement was published following the G20’s meeting in Sydney earlier this month.
In a statement earlier this week, International Monetary Fund (IMF) Managing Director Christine Lagarde welcomed the G20’s move, but stressed the need to manage “spillovers.” “Global dialogue and improved communication are essential to help safeguard financial stability,” Lagarde said.
For his part, Tetangco said the G20’s commitment to “carefully calibrate and clearly communicate” its monetary policy moves would help restore a sense of calm in financial markets.
The effects of surprise policy moves and announcements were felt by emerging markets last year after the US Federal Reserve signaled for the first time in five years that it would scale back its support for the American economy.
The Fed’s move to scale back its quantitative easing program meant a slowdown in the stream of cheap money into the global economy. This sent investors packing from emerging markets like the Philippines to return to the US and other safe havens.
The G20’s call for its members to signal policy moves more clearly would help in calming down global investors, Tetangco said.
“This should be market-positive, including for emerging market economies. That said, it should not be a license for liberal market risk-taking. Markets should distinguish between economies that have kept their houses in order and those that have lagged in this respect,” he added.
The Philippines had the fastest-growing economy among major Southeast Asian markets in 2013. With gross domestic product (GDP) growth clocking in at 7.2 percent last year, the Philippine economy was also the second-best performer in Asia, or second only to powerhouse China.
To take full advantage of the G20’s pledge to improve economic growth, Tetangco said policymakers in the Philippines should sustain efforts to lay down the foundation for the country’s sustainable expansion. “In particular, continue reforms to enhance productivity, improve the investment environment, and spend on appropriate infrastructure,” he said.