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This week, on July 4, the Bangko Sentral ng Pilipinas
marks its 15th year. This week, too, Amando Tetangco Jr. completes
his the first half or the first three years of his six-year term as
governor of Bangko Sentral ng Pilipinas.
The BSP came into being in 1993
because the old Central Bank of the Philippines (created in 1949)
became bankrupt after agreeing to absorb P400 billion in foreign
exchange losses of the private sector in the mid-1980s.
The new central bank, the BSP,
has one simple mandate—maintain price and monetary stability. That
means controlling inflation and keeping the peso-dollar rate stable.
The old central bank had a very
difficult mandate—promote a rising level of income, production and
economic activity.
The formula for the BSP seems to
have worked.
In the first 15 years of the BSP,
the economy posted an average annual GDP growth rate of 4.29
percent, respectable considering that growth in 1991 was negative
0.6 percent and in 1992 an infinitesimal 0.3 percent.
Remarkably, the Philippines’
best economic growth was registered during the first three years of
Tetangco as governor—an average of 5.9 percent. This is better
than the 4.18 percent average under Gov. Rafael Buenaventura (July
6, 1999 to July 3, 2005) and the 3.6 percent under Gov. Gabriel
Singson (July 6, 1993 to July 5, 1999). Both Buenaventura and
Singson were highly regarded during their watch as governors.
The 5.9 percent three-year
average GDP growth under Tetangco is far higher than the 2.2 percent
population growth rate for a per capita growth rate (GDP growth rate
minus population growth rate) of 3.7 percent.
Note that from 1975 to 2005,
Philippine per capita economic growth was a scandalously low 0.4
percent—the lowest in Asia and one of the lowest in the world.
Vietnam grew by 5.2 percent per
capita during the same 30-year period. Oil-rich Malaysia had a
30-year per capita growth of 3.9 percent.
The year 2007 was singular for
the convergence of two major economic achievements—low inflation
and high growth rate. The 2.8 percent inflation rate was the lowest
in 21 years. The 7.3 percent GDP growth was the highest in 31 years.
Indeed, inflation averaged 6.6
percent from 1990 to 2005. GDP growth was a measly 1.6 percent
during the same 15-year period, according to World Bank data.
How that convergence of low
inflation and high growth rate came about is the result of another
convergence, by the government and the central bank both doing their
job—well.
The national government did well
on the fiscal side. It reduced its budget deficit magnificently, to
P12.4 billion, lower than the P63 billion budgeted and just 0.2
percent of GDP. It created the right climate for investment,
resulting in the highest foreign direct investment (FDI) inflow in
ten years, $2.9 billion.
The Bangko Sentral did well in
managing inflation, resulting in the lowest inflation rate in more
than two decades. It helped that agriculture was robust, resulting
in ample and cheap food supply (before the rice crisis erupted early
this year). The peso was also strong against the dollar, resulting
in lower cost of imported inputs used by factories.
Since inflation in 2007 was at a
21-year low, “we delivered on our mandate,” exults Tetangco.
This makes the Pampanga native the best central bank governor we
ever had.
However, enthusiasm with
Tetangco’s record in the first half of his six-year term is
tempered, by two things: one, the need to duplicate the 2007
achievement during this year, which is quite difficult; and the
threat of surging inflation, which has yet to subside.
The reason for that difficulty is
two things: one, food prices have risen to their highest in 30 year,
caused in part by the lowest food stocks in 20 years. At the same
time, oil prices have risen to their highest level in history, at
$140 per barrel, and still rising. The poor of this country lost
P156 billion in purchasing power this year because of this
inflationary double whammy, according to Albay Gov. Joey Salceda, a
respected analyst.
Then there is the backdrop of
worsening poverty amid signs of prosperity. Salceda is aghast that
from 2003 to 2007, poverty rose, from 24.7 percent of total families
to 27.2 percent.
The number of poor families
swelled from 4.0 million to 4.7 million. Meanwhile, growth slackened
in the first quarter, from 7.0 percent in 2007 to 5.6 percent this
year. Unemployment climbed, from 7.4 percent to 8.0 percent. The
number of people without jobs grew from 2.69 million to 2.91
million.
The number of people with jobs
declined, from 33.77 million to 33.53 million in April. More than
240,000 lost their jobs even while the economy was expanding.
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