BANGKO SENTRAL ng Pilipinas (BSP) Governor Benjamin E. Diokno is “cautiously optimistic about the current state of the Philippine economy,” amid lingering global headwinds.
“(We) recognize the uncertainty in the global economic environment, with the IMF (International Monetary Fund) further revising down its global growth prospects due to volatilities in commodity prices, uncertainty over advanced economies’ policy normalization, as well as ongoing trade tensions as a result of the US-China (trade) war,” Mr. Diokno said in a speech during the centennial anniversary of the Rotary Club of Manila on Thursday evening.
The IMF warned that rising trade tensions may contribute to a global economic slowdown. In April, it lowered its outlook for global growth to the lowest since the financial crisis, citing downside risks such as the collapse of US-China trade talks.
“But while the external environment is challenging, I am cautiously optimistic about the current state of the Philippine economy,” Mr. Diokno said, adding that the IMF, World Bank and Asian Development Bank growth expectations are in line with the government’s revised growth targets of 6-7% in 2019 and 6.5-7.5% in 2020.
However, Mr. Diokno said the government is ensuring there are “adequate buffers” to shield the economy from the possible negative effects of these external shocks, particularly “rising protectionist measures and heightened policy uncertainty.”
“‘Keeping our house in order’ remains the first and best line of defense,” the BSP chief said.
“We are improving economic openness through liberalization of trade and foreign direct investment, we are enhancing external competitiveness by strengthening domestic industries; we are diversifying products and markets to non-traditional growing economies; and we are sustaining domestic economic resilience by building adequate buffers.”
The on-going trade war between the United States and China has not had a significant impact on the Philippine economy so far.
“There was no direct imposition against the Philippines in terms of the country’s exposure to the products imposed with tit-for-tat measures between the US and China. But the extent of the impact would depend on the industries affected,” Mr. Diokno said.
He said the Philippines could increase exports of food and agricultural products to the US, taking advantage of the tariffs slapped by the US on similar Chinese goods.
The US-China trade war may also have a positive impact on the Philippine electronics sector, Mr. Diokno said.
“That is if companies on either or both of the countries use the Philippines as an alternative manufacturing site. This scenario, however, would take time and the Philippines would have to compete with other potential relocation sites like Vietnam and Indonesia,” he said.
However, Mr. Diokno noted this may not happen in the next few years as it takes time to shift production facilities to another country.
“We also recognize the continued trade friction could negatively affect overall investment sentiment and increase caution and uncertainty in the global growth prospects. This could take a toll on the country’s external sector. Nevertheless, given that the economy’s growth is mainly driven by domestic demand, the trade friction would have limited negative impact on Philippine exports,” he said. — R.J.N.Ignacio