The Philippines and its neighbors in the East Asia-Pacific region continue to enjoy strong macroeconomic fundamentals, according to Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr.
“The Philippines is in a good neighborhood of countries that continue to have growth, low inflation and stable banking system,” he said.
Tetangco added that ample liquidity is another thing that can be found in these countries that will continue to support sustained economic growth and requirements of different sectors of the economy.
The BSP governor is pertaining to countries in the Association of Southeast Asian Nations plus Japan, Korea, China, Hong Kong, New Zealand and Australia.
However, Tetangco admitted that there are volatilities that have been experienced in the region, and a number of policy responses have been adopted by the central banks of these countries.
“Central banks have continued to use enhanced policy toolkits and this would include not only the interest rates but also in the case of the Philippines, we have encouraged prepayment of external debt because of the surge in capital inflows,” he said.
The BSP governor continued that the Philippines also liberalized its foreign exchange regulations to encourage more outflows and adopted macroprudential measures.
The liberalization of existing foreign exchange rules aims to keep forex policies responsive to current economic conditions.
With the new rule, residents can now buy a higher amount of foreign exchange to meet the rising costs of education and medical bills incurred offshore, foreign travel and other services, without need for documentation.
Residents will also have more investments instruments to choose from that can be funded with foreign exchange bought from banks, while nonresidents have been given more options for funding their onshore peso requirements.
“The other countries in the region have also done these. The approach has been basically the same but sometimes the measures will differ from country to country, but the adoption of macroprudential measures has been observed regionwide,” Tetangco said.
Furthermore, he stated that another policy response adopted in the region was the improvement of regional surveillance to ensure the resilience of its financial system.
“As the region continues to be integrated, we have been monitoring financial systems and we know that developments in one system will affect other financial systems in the region,” he added.
In the case of the Philippines, the BSP governor reported that based on the latest assessment, the country’s banking system continues to be sound and stable with better capitalization, improved asset quality and profitability. Also, Tetangco said that the other thing that is helping the financial system among the East Asia-Pacific countries is that there is ample liquidity both in terms of domestic and foreign exchange.
Moreover, Tetangco noted that the region had also adopted microsurveillance of financial institutions to compliment its macroeconomic surveillance settings.
“Bottomline is, OK there are volatilities and these will remain as the advanced economies unwind their easy policy, but the East Asia-Pacific economies are in a position to ride through these volatilities,” he said.