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Philippines – BSP: Expansionary monetary support still warranted
MANILA, Philippines — An expansionary monetary support remains warranted as the reimposition of strict mobility restrictions may impede the country’s faster recovery from the pandemic-induced recession, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno.
In a virtual forum, Diokno said the Monetary Board is likely to keep its monetary policy accommodative in support of the country’s economic recovery from the COVID-19 pandemic.
“The accommodative monetary policy settings provide significant stimulus to demand and should be allowed to continue to work their way through the economy to bolster recovery in private consumption and investment,” Diokno said during the Sulong Pilipinas 2021 Forum.
The BSP chief said the recovery is still in an early stage as the economy is expected to expand from between six and seven percent this year. “We recognize that the economy is still in its nascent recovery phase,” Diokno said.
As COVID-19 infections breached one million with close to 17,000 deaths, the National Capital Region and nearby provinces or NCR Plus was placed under enhanced community quarantine from March 29 to April 11 and under modified enhanced community quarantine from April 12 to 30.
With the rollout of the vaccination program, Diokno believes the economy is at the tailend of the crisis after contracting by a record 9.6 percent last year.
Diokno said the BSP has so far infused over P2 trillion or 11 percent of GDP in liquidity into the financial system.
Among the BSP’s long list of COVID-response measures were the series of policy rate cuts last year, totaling 200 basis points. These moves were meant to influence banks to lower their lending rates as well, thereby encourage credit taking to support economic activities.
The BSP has kept the benchmark interest rate at an all-time low of two percent since the surprise 25- basis- point rate cut made on Nov. 19, 2020.
Diokno said green shoots have been emerging since the third quarter of 2020, including improved manufacturing activity. However, the recent surge in COVID-19 cases meant there is no room for letup in efforts toward economic recovery, he said.
“As the Philippines continues its battle against COVID-19, the BSP remains one with the government and the entire Filipino people in dealing with this crisis head on and in pushing the economy toward full recovery,” he said,
Diokno said the impact of the COVID-19 crisis on the Philippine economy is transitory. “Our fundamentals remain solid, and these will carry us through full recovery,” he said.
Source: https://www.philstar.com/business/2021/04/27/2093939/bsp-expansionary-monetary-support-still-warranted