The Philippines can weather any disruptions that a potential global economic slowdown or a financial crisis may bring, thanks to the country’s strong fundamentals and a vigilant monetary regulator, the head of the central bank said.
Speaking before Euromoney’s Philippine Investment Forum on Tuesday, Sept. 24, Bangko Sentral ng Pilipinas (BSP) Gov. Benjamin Diokno also noted that the Duterte administration’s commitment to its P9-trillion infrastructure buildup program will help fuel “high, sustainable and more inclusive economic growth.”
“The Philippines is resilient to shocks, and the BSP is committed to continue effectively managing the country’s external accounts to help ensure this resilience is maintained,” he said in his speech.
Buttressing his point is the country’s external payments position which is recovering from record levels of dollar outflow last year brought by the country’s large trade gap as it buys more goods and services abroad for the ongoing infrastructure boom.
“Based on the latest estimates, the country is expected to post a US$3.7 billion surplus in its balance of payments this year,” Diokno said. “Thanks to solid foreign exchange inflow in the capital and financial account, the deficit in the current account is more than adequately covered.”
The central bank chief noted that the the large deficit in the current account “is not something out of the ordinary, especially for a growing economy like ours that is investing vigorously in its future through an aggressive public infrastructure drive.”
“With rising public and private investments, importation of rawer materials, intermediate goods, and capital equipment has also been growing,” he said. “This explains the current account deficit, which nevertheless, is financeable, given robust foreign exchange inflows in the financial and capital account.”
Despite the global uncertainties — including the possibility of a full-blown trade war between the US and China — he pointed out that the Philippines is expected to remain among the fastest growing economies in the world.
To make sure this remains the case, Diokno said the central bank will maintain a regulatory environment that allows the financial system to remain stable, to flourish and to further support growth of the economy.
This effort includes pursuing initiatives toward an even more efficient, dynamic, and inclusive financial system, he said.
Finally, he stressed that the central bank “remains committed” to its core mandate of price stability. As such, he said that regulators stand ready “to use any of its tools, if and when necessary, for effective inflation management.”/TSB