‘Growth risks could come from US, China’

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Bangko Sentral to remain watchful – Tetangco

Global and domestic risks will continue to challenge the Philippine economy this year, the Bangko Sentral ng Pilipinas (BSP) chief said, but monetary authorities remain committed to supporting growth through price and financial stability.

“While recent developments continue to indicate a path toward sustained resilience for the Philippine economy, we remain mindful of the potential risks that lie ahead,” central bank Governor Amando Tetangco Jr. said in a remarks during a Tuesday Club meeting.

On the global front, he said the central bank was continuing to pay close attention to three factors: Growth prospects in major emerging market economies (EMEs) and advanced economies, the impact of interest rate adjustments by the US Federal Reserve and oil prices.


With major EMEs—China in particular and the US, eurozone and Japan—the Philippines’ major trading partners, Tetangco said monetary authorities were cautious as to how their economic growth paths would evolve in 2016.

The central bank is also looking at the speed and magnitude of interest rate adjustments by the US Fed plus the knock-on effects on global capital flows, exchange rates and the implications on domestic financial asset valuations and debt.

A concern is also the trajectory of oil prices and the impact on oil-exporting economies, such as Saudi Arabia, that host a significant number of overseas Filipino workers.

“This also has implications for the path of global and domestic inflation,” Tetangco said.

On the domestic front, the central bank chief noted unique challenges such as a harsher and prolonged El Niño and the national elections—the latter bound to generate changes that could influence the global perception of Philippine growth prospects.

“It is important therefore that confidence in the economy is sustained during this leadership transition,” Tetangco said.

“As an independent constitutional institution, the BSP is in a rare position to help provide continuity of the stable economic environment that has been a source of strength for our economy,” he added.

Amid these potential challenges, Tetangco gave assurances that the central bank remained committed to achieving its price and financial stability mandate.

“The BSP will continue to closely monitor the inflation process. While the latest baseline forecasts show that inflation could settle slightly below the inflation target range in 2015 due to the successive low inflation outturns in recent months, inflation is projected to return gradually to a path consistent with the national government’s inflation target range of 2 percent to 4 percent in 2016 to 2017,” he said.

Tetangco added that future monetary policy decisions would remain data-dependent, taking into account the confluence of demand and supply factors.

Furthermore, he said that the central bank would push through with its plan to establish an interest rate corridor system to help improve the transmission of monetary policy, sustain banking reform, remain firmly committed to a market-determined exchange rate policy, further promote financial inclusion and ensure the adequate and timely supply of good-quality currency.

“2016 is expected to be another challenging year. It is important therefore that we remain nimble and flexible in the face of shifts in our operating environment,” Tetangco said.

For the Philippines, he stressed that positive growth prospects and solid macroeconomic fundamentals would be the overriding pull factors to keep the economy steady over the near and medium terms.

“Toward this end, therefore, the BSP will continue to craft and implement monetary and banking policies and programs in support of its mandate of once and financial stability,” Tetangco said.

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