Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. firmly believes in a sustainable Philippine growth momentum in the face of uneven global growth.
In his lecture, “Delivering Bold Strokes Without Throwing Caution to the Wind,” at the Philippine Embassy in Washington DC on Tuesday, ahead of the April 21 to 23 World Bank/International Monetary Fund (IMF) Spring Meetings, noted the global economic upturns seem uneven.
He warned of possible global headwinds from “asynchronous monetary policy in reaction to modest but uneven recovery in global economic activity.”
Earlier, the IMF said global growth will probably accelerate to 3.5 percent this year and 3.6 percent in 2018 from 3.1 percent in 2016.
The dissonance between perception and actual policy moves heightens market volatilities, and the risks of retreat from multilateralism also produce global policy uncertainty, Tetangco said.
Nevertheless, Tetangco believes the Philippine growth momentum can be sustained in light of a broader base for economic expansion.
The official growth target is 6.5 percent to 7.5 percent this year. In 2016, the economy grew by 6.9 percent.
Inflation is moving within expectations, and the banking system is sound and stable, the central bank official noted.
In the first quarter of 2017, inflation picked up at 3.2 percent, still within the 2 percent to 4 percent official target this year. The BSP sees the average inflation for 2017 at 3.4 percent, compared with 1.8 percent last year.
The Philippines has robust external profiles in the balance of payments (BoP) and gross international reserves (GIR), Tetangco said. He argued that the exchange rate is market-determined and that the peso remains broadly stable and competitive.
Latest data showed the country’s BoP in the first quarter of the year yielded a deficit of $994 billion, from a $210-million shortfall in the first three months of 2016.
The GIR stood at $80.87 billion as of end-March, dipping 0.63 percent from $81.43 billion in February.
The peso is now trading in the $49:$1 are after weakening to P50:$1 in the past two months.
On the question of reaping dividends from growth, Tetangco told the audience that he expects institutional and systemic reforms to yield further dividends, particularly in improved labor market outcomes and income equality.
He said the national government has laid the foundations for inclusive growth, especially with increased spending on infrastructure.
The government has adopted an ambitious six-year infrastructure spending program of P8.4 trillion.
Tetangco said the BSP remains committed to maintaining price and financial stability, and emphasized the importance of maintaining the central bank’s “institutional independence as a vital foundation of efficient and effective policy making.”
He said it is important that the central bank not lose sight of the social dimension of monetary and financial policies.