The Market Monitor Minding the Nation's Business
Riza Lozada
The Bangko Sentral ng Pilipinas (BSP) will remain resilient, creative and innovative in its policies to keep the economy at a steady pace of growth.
This was the assurance made by BSP Governor Amando Tetangco Jr. in a forum before members of the Management Association of the Philippines (MAP).
Noting that the Philippines has been tagged as among the brightest economic spot in Asia, Tetangco said: “Keeping one’s own house in order entails putting together policies that are responsive. However, what can be considered responsive today may not necessarily be what is responsive in the future. Keeping one’s house in order, therefore, requires creativity and innovativeness,” he said.
The BSP will maintain a monetary policy framework that is “calibrated and appropriately flexible,” he added. “We constantly improve our surveillance capabilities, fine-tune our econometric models, perform scenario building, and engage the market and our regional counterparts to make sure the inputs to policy are always fresh.”
He added: “For 64 successive quarters, the Philippines has been marking positive growth. In 2014, the full year growth of 6.1 put the Philippines second to China among select Asian economies. This growth performance is being underpinned by the sustained contributions of the services sector, the recent rebound in manufacturing, and favorable improvements in labor dynamics as we stand at the cusp of what the United Nations calls the ‘demographic sweet spot’.”
The demographic sweet spot Tetangco was referring to is the situation in which majority of the population reaches working age. The Philippines is considered having a population with the youngest average age in the region, if not the world.
This sustained output growth was attained in a stable inflation environment with the full-year 2014 inflation at 4.1 percent, marking the sixth consecutive year that inflation was within the target range of the government.
The headline inflation was at 2.4 percent in January 2015, within the target range for 2015 of 2 percent-4 percent, according to the BSP governor.
Money supply remains sufficient to support the sustained demand for credit, the bulk of which continues to be channeled to the key production sectors.
“Intermediation of these funds has been safe and efficient owing to our sound and stable banking system,” he said.
It’s worth noting that of the 69 jurisdictions rated by Moody’s, it was only the Philippines banking system that Moody’s gave a “positive outlook” rating.
“Indeed, our banks have strong balance sheets. The banking system’s capital-adequacy ratio (CAR) is above both the national and Basel standards.
“The quality of our banks’ loan portfolios for universal and commercial banks (UKBs) also continues to be healthy, with a non-performing loan (NPL) ratio at 1.98 percent as of November 2014,” Tetangco said.
He noted that the country’s external account sustained current-account surpluses since 2003, attributed to strong remittance flows, Business Process Outsourcing (BPO) receipts and from tourism.
“This has allowed us to build up our gross international reserves (GIR) to $80 billion, which is more than 10 months’ worth of imports of goods and payment for services,” he said.
Tetangco said these macroeconomic achievements were indicators that the Philippines was not severely affected by the global financial crisis.
The monetary authorities, according to Tetangco, achieved these fundamental macroeconomic reforms by keeping its house in order.
He said that in the most recent Monetary Board policy meeting, policy rates were kept steady, even as some in the region have lowered their rates.
“Our assessment then was that inflation would remain within the government’s target range of 2 to 4 percent over the policy horizon and that the risks to this forecast are balanced,” he said.