ECONOMIC headwinds now seem to be a permanent trait of the global economy, but the central bank noted the Philippines has erected enough buffers to stave off its impact on the domestic production and consumption of goods and services.
The engines of Philippine economic growth are in good shape to create value, while other emerging markets experience moderation in growth and falter from global headwinds, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said.
“We do not wish to nor can we downplay these headwinds. In fact, shifting sands seem to be the ‘permanent’ character of the global economy today,” he said during a lunch meeting of the Rotary Club of Makati West on Thursday last week.
The BSP governor said most of these headwinds are of external origin, citing the faltering global recovery and the possible spillovers from the impact on the United Kingdom and European Union of transition as the UK implements its exit from the EU.
There is also uncertainty regarding the timing of normal monetary policy in the United States in contrast to the accommodative policies of other major central banks, namely the European Central Bank and the Bank of Japan.
“Monetary policy divergence fosters an environment of volatility in capital flows, which can ultimately hamper global recovery,” Tetangco noted.
Instability in commodities prices, crude oil in particular, contribute to the uncertainty and fiscal pressures on oil-producing nations, which could eventually spillover to other economies in the form of lower demand and investment.
There are also salient non-economic risks including terrorism, political divisions within advanced economies, and armed strife which further complicate the growth prospects, Tetangco said.
“These headwinds continue to motivate policy makers to build buffers to shield any economic gains that have so far achieved, from being chipped,” he said.
The BSP policy on the exchange rate also remains the same: “we will allow the exchange rate to be broadly determined by the market, but we will step in when, in our view, the moves are excessive,” he said.
On banking, the central bank will continue to align regulations to international standards and closely monitor the conduct of banks and supervised institutions, including their credit and market operations, to make sure that in all these the financial consumer is adequately protected, he added.
“What do these insights tell us about, moving forward? The future is not completely decipherable. But we will continue to implement policies and calibrate our actions to maintain the strength of our macroeconomic fundamentals,” Tetangco concluded.