Philippine Central Bank Governor Sees Solid Rebound for Pandemic-Hit Economy in 2021

BSP
FILE PHOTO: A logo of Bangko Sentral ng Pilipinas (Central Bank of the Philippines) is seen at their main building in Manila, Philippines March 23, 2016. REUTERS/Romeo Ranoco/File Photo

MANILA — The worst is over for the pandemic-hit Philippine economy, and a ‘remarkable rebound’ is expected this year, the central bank chief said on Tuesday, adding that the current accommodative monetary stance is sufficient for a revival in growth. 

“The worst is behind us. The recovery phase has begun,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told the Reuters Next conference, citing ‘green shoots’ such as improvements in remittances and foreign direct investments.

Speaking ahead of the release of the 2020 GDP data on Jan. 28, Diokno said he also expected ‘solid’ growth in the December quarter and ‘double-digit’ growth in the second quarter of this year.

He added that “the current policy is sufficient to carry us through” after the economy suffered its first recession in nearly three decades in 2020.

Growth is forecast between 6.5%-7.5% this year, after last year’s projected contraction of 8.5%-9.5%, he said.

The BSP delivered five interest rate cuts totalling 200 basis points last year, with the benchmark overnight reverse repurchase facility rate at a record low of 2%, making it among the world’s most aggressive in policy easing.

It also cut banks’ reserve requirement ratio by 200 basis points and provided extra liquidity support by purchasing government securities and extending loans to the government.

In sum, the central bank has injected about 2 trillion pesos ($41.6 billion) into the financial system, equivalent to 10% of the country’s GDP.

Diokno said inflation, which averaged 2.6% in 2020, will remain within the 2%-4% target range this year and in 2022, providing space for the BSP to further support growth, if necessary. 

The central bank is set to review monetary policy on Feb. 11.

Reporting by Karen Lema; Additional reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Shri Navaratnam; Reuters

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