Economy sufficiently buffered in case trade disrupted, BSP says

THE ECONOMY is sufficiently insulated in the event the post-pandemic trade recovery falters due to supply chain disruptions and China’s slowing growth, the central bank governor said.

“Allow me to emphasize that the Philippine economy has sufficient buffers to ward off the potential adverse effects of increased external headwinds,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said in an online briefing Thursday.

The Philippine Statistics Authority said the trade deficit in September stood at $4 billion, widening from the $2.27 billion deficit a year earlier and the $3.51 billion deficit in August. Exports rose 6.3% year on year to $6.68 billion, while imports rose by about a quarter to $10.67 billion.

Mr. Diokno said the base effects from the trade slump last year are expected to wane in the next few quarters, though he remains bullish that strong demand for tech products will boost exports.

“Firmer commodity prices, particularly in mineral and agro-based products, as well as a pickup in domestic production capacity amid phased easing of mobility restrictions, likewise lend support to the exports outlook,” he added.

However, Mr. Diokno also warned that the trade recovery is still uncertain and will depend on whether new, more infectious variants of coronavirus disease 2019 (COVID-19) emerge, heralding the return of restrictions and further supply chain disruptions.

Another factor that could dampen the recovery in trade is China’s slowing economy, in terms of the impact on exports and the manufacturing industry, Mr. Diokno said.

On the other hand, Mr. Diokno said positive factors include the increase in vaccination rates and progress being made in new treatments for COVID-19.

Mr. Diokno said the Philippines has strong fundamentals to sustain it through the negative impact of any trade disruptions. He cited ample dollar reserves, foreign direct investment flows, as well as remittances and business process outsourcing receipts.

Mr. Diokno said the central bank will also continue to provide guidance that could help exporters in making sound economic and financial decisions.

He said the BSP’s rediscount facilities and hedging mechanisms as well as products offered by banks promote access to credit by exporters.

“As a matter of policy, the BSP adheres to a market-determined exchange rate regime and utilizes a mix of policy tools to temper undue volatility in the foreign exchange market,” Mr. Diokno said. — Luz Wendy T. Noble