BSP appeals to gov’t, private sector: Use idle liquidity

The Bangko Sentral ng Pilipinas Wednesday said that the low inflation rate regime it has helped maintain gave the Philippines a stable platform from which to grow faster. It stressed, however, that the government and the private sector have to take up the slack by putting the large amount of cash in the local economy to productive use.

Speaking at a forum organized by Bloomberg News, BSP Governor Amando M. Tetangco Jr. said that even as regulators have “monetary policy space” to keep prices stable, low inflation and a strong banking system was “just one component of a vibrant economy.”

“We need the other cylinders of the economy to be working, too,” said Tetangco, who is on his final 11 months as the country’s central bank governor.

In particular, he called on fiscal authorities “to ramp up infrastructure spending”.

Ever since the Philippine economy was flooded with liquidity in the aftermath of the 2008 global financial crisis, the central bank has been calling on the government—to little avail in recent years—to help accelerate spending, including through the speeding up of the big-ticket infrastructure projects that could benefit from low borrowing costs.

At the same time, Tetangco also called on the private sector to redouble its efforts to soak up the liquidity in the financial system by undertaking large investments that would also help use up the idle funds in the financial system.

“We need the cooperation of the private sector to find feasible long-term projects that would help raise the absorptive capacity of the economy,” he said. “In this whole process, we need you to facilitate the movement of funds from savers to users, in a safe, efficient and sound manner.”

In this regard, Tetangco reassured would-be private sector investors that monetary authorities would continue to pursue its mandate of “securing price and financial stability through an appropriate policy stance and relevant measures.”

The BSP chief noted that, long after the the 2008 global financial crisis, the world was still struggling to define what the “new normal” economic and investment environment was. He cautioned that, far from returning to normalcy, the financial world was now in an era of “radical uncertainty.”

As such, he called on bankers to take their cue from monetary authorities and help allocate financial resources to where they were most needed.

“We need treasurers and market participants to go beyond mark-to-market gains on your financial assets,” he told the forum participants. “We need you to translate those financial assets to gains in the real sector that can help create jobs.”