Philippines – BSP: Prioritize restarting economy first

• May 12, 2020

MANILA, Philippines — Restarting a “new economy” that is safer, better, and more technology-savvy is more important than achieving the much-coveted A-scale credit rating and upper middle income status, according to the Bangko Sentral ng Pilipinas.

BSP Governor Benjamin Diokno said monetary and fiscal authorities are putting more emphasis on softening the blow and preventing the further spread of the coronavirus disease 2019 or COVID-19.

“The political leadership and the economic managers should focus on saving lives, saving livelihoods, and saving jobs. The lofty goals of getting A-rating by 2022 and achieving upper middle income status this year can wait,” Diokno said.

Diokno said authorities have taken a whole-of-government approach to get the economy back to pre-COVID-19 trajectory as soon as possible.

“As individuals and as a people, we should prepare for a new economy – not a new normal, which is an oxymoron. The new economy should be better, safer, and more technologically ready,” the BSP chief said.

The economy contracted by 0.2 percent in the first quarter, ending 84 straight quarters of robust economic growth.

The BSP chief said the  contraction is likely to “go deeper” in the second quarter as the gross domestic product is seen contracting by one percent or likely to be flat this year before bouncing back with a growth of 7.8 percent next year.

Fitch Ratings revised the country’s credit rating outlook to stable from positive last week due to the adverse economic effects of COVID-19 and the Luzon-wide enhanced community quarantine.

Fitch expects the economy to contract by one percent this year, the first in 22 years as the economy last contracted by 0.5 percent in 1998 due to the Asian financial crisis.

The pandemic has resulted in a wave of unfavorable credit rating actions worldwide. For the first four months, Fitch has downgraded the rating of 21 sovereigns and assigned negative outlook to the rating of 25 countries out of 119 countries that it rates.

Japanese investment house Nomura said S&P is also likely to revise its outlook on the Philippines’ credit to negative from stable in the next six to 12 months due to the economic fallout from the global virus outbreak.

Diokno said the country’s “Road to A” campaign aimed at achieving the much-coveted A-scale would have to take a backseat

Prior to the pandemic, the National Economic and Development Authority (NEDA) was hoping that the Philippines could graduate to upper-middle status this year.

The Philippines had a per capita gross national income (GNI) of $3,830 as of end 2018, slightly below the $3,996 to $12,375 GNI per capital set by the World Bank for upper middle-income economies.

Source: https://www.philstar.com/business/2020/05/12/2013321/bsp-prioritize-restarting-economy-first