BSP chief: V-shaped economic recovery at best, U-shaped at worst

The head off the country’s central bank said on Wednesday (March 18) that the Philippine economy will surely be adversely impacted by the coronavirus epidemic, but that the question of how fast the recovery will be will depend on the success of the ongoing lockdown.

In a mobile phone message to the media, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the Luzon-wide community isolation “will definitely have an impact” on the economy but that this action is meant to be a temporary.

“If it succeeds, the adverse impact will be minimal and we can expect a V-shaped recovery,” the central bank chief said. “If it fails, the adverse impact can be large and protracted, and the recovery can be an elongated U.”

The central bank’s Monetary Board will meet on Thursday (March 19) to decide on interest rate policy, with Diokno saying earlier that the rate cut could be as much as 50 basis points to help stimulate the economy.

Economic managers have yet to release revised economic growth forecasts to account for the COVID-19 outbreak’s effects on the country’s growth, but third party analysts are predicting substantially slower gross domestic product growth.

In particular, Moody’s Investors Service recently cut its growth forecast for the Philippines to 5.4 percent for 2020, which marks the second time it lowered its estimate from 6.1 percent for the year only last February.

The new forecast slid under not only the government’s 6.5 to 7.5 percent target but also 2019’s eight-year low growth of 5.9 percent.

Diokno pointed out that the 30-day lockdown period straddles two economic quarters, the first and the second, and the focus “should be on how to make the Luzon-wide community isolation measure work.”

“The community isolation measure takes the nature of a public good,” the central bank chief said. “My behaviour affects my fellowmen, what they do affects mine. If everyone embrace community isolation and cooperate, it will not only benefit oneself, one’s family, but it will also  the whole community and society.”

“Moral of the story: let’s cooperate, let’s hope the community isolation works. If you have no business going out of your home, stay home,” he said.

The central bank and the rest of the economic managers announced that the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF) granted the

Request of various financial market trading platforms to be exempted from the enhanced quarantine measures.

This was after the leaders of the Philippine Stock Exchange, Philippine Dealing & Exchange Corporation, Philippine Depository & Trust Corporation, and the Philippine Securities Settlement Corporation “assured the authorities that necessary safeguards to ensure the safety of their employees and the community they interact with are in place.”

“The IATF and concerned government agencies, such as the Securities and Exchange Commission, Department of Finance, and Bangko Sentral ng Pilpinas, have been actively coordinating with these market platforms to facilitate a swift resumption of operations,” the economic managers said in a joint statement.

Edited by TSB