We mourn the passing of Governor Nesting Espenilla. A profound loss to his family and friends, to the BSP which has been his home since UP days and to our country and people. As a tribute to him and his work, I am sharing the introduction of an interview Christine Tang and I did for GlobalSource Partners ( in January 2018.
His job was going to be “the most important appointment” that President Rodrigo Duterte was going to make. That was what Finance Secretary Carlos Dominguez told the President, who was then less than a year in office, about his upcoming choice for the next governor of the Bangko Sentral ng Pilipinas (BSP). The Secretary made sure to let the President know that if it were up to him, he would prefer someone in the mold of Amando Tetangco, the highly-regarded and multi-awarded BSP Governor who, for 12 years, was a stabilizing anchor to the Philippine economic ship.
It was thus the most awaited announcement in the local financial community at the start of 2017, a time of high anxiety due to political and economic uncertainties here and abroad. The President bided his time in naming Mr. Tetangco’s successor, and in the interim contributed to the air of uncertainty with his unorthodox style and outspokenness, including threats against the Anti-Money Laundering Council (AMLC), chaired by the BSP Governor, which raised more fears that he would name a political ally to ensure the AMLC’s cooperation in his drug war.
Nestor A. Espenilla, Jr.’s name was finally announced around dinnertime on May 8, instantly putting economic watchers and the financial community in a celebratory mood. Commentators toasted the President for choosing wisely, someone not known to him personally; they saluted Secretary Dominguez for helping the President choose wisely with, we heard, a very, very short list of candidates; and praises went to the BSP for having nurtured and trained a bright and talented young economist into a mature central banker who easily stepped into the leadership role when the time came.
Mr. Espenilla took office on July 3, 2017, perhaps the most well-rounded in central banking of all those who came before him. His career in the BSP (previously, the Central Bank) spanned over 30 years, starting in economic research, then international operations, then supervision and examination of financial institutions, where he rose to Deputy Governor in 2005. Like his predecessor, his was a crisis-tested professional life, going way back to the 1980s debt crisis, followed by the Asian Financial Crisis in the 1990s, and the Global Financial Crisis a decade later. Graduating magna cum laude, Mr. Espenilla held a BS in business economics degree from the University of the Philippines where he also earned a masters in business administration (MBA). He also had an MS in policy science from the Graduate Institute of Policy Science in Tokyo, Japan.
Those who knew Governor Espenilla were one in saying that his rich experience, high intelligence, and humble and easy disposition equip him well to continue the legacy of Governor Tetangco in shaping the BSP to be “alert, nimble, responsive and able to provide the stability necessary to give direction that the market needs at any time,”while breaking new ground in the Philippine’s quest for greater financial inclusion and capital market development, and in facing new challenges coming from increased global economic and financial integration and disruptive technology.
I share the hope of the financial community and general public that once again, authorities will choose wisely and well to ensure “Continuity ++” in our central bank and our country’s finances. To do otherwise risks gains made to bring us on a much higher growth path of 7-8% annually to improve our people’s lives. Even the lower end of this range is ambitious. Our forecast for GlobalSource Partners is only 5.8-5.9% over the next two years, among the less upbeat. This is what said in our Chinese New Year cum Valentine’s Day report :“The Days of Swine and Roses.”
“The economy’s recent performance, where higher domestic demand growth led to higher import leakages, suggests that growth rates approaching 7% are unlikely in the short term. Too, monetary tightening last year that raised interest rates by a total of 175bp will exact some pain on consumer and business spending. Thus, despite falling inflation and some reinforcement from election spending, we think that output growth will continue to slide and fall below 6% as opposing forces weigh on domestic demand components.
In particular, while household spending can rely upon the usual support from overseas remittances, growth is expected to remain in low single-digit, with friendlier foreign worker policies in Japan counteracted by tighter visa policies in the US even as countries in the Middle East continue to grapple with fiscal problems and favor local-hire policies. Likewise, while the BPO industry is looking at continuing jobs expansion, the sector grew markedly slower last year and remains under threat not only from adoption of AI technologies but also from uncertainty in the business climate as the mid-term elections near with government’s proposed reform on corporate taxation passed over by Congress. Fiscal spending, which has been a key driver of recent growth, may also hit speed bumps in the near-term associated with the delayed passage of the national budget, election spending bans and potentially, closer scrutiny of budgetary processes that may have permitted quicker procurement recently. Continuing strain from net exports is also expected.”
The one counterweight to these headwinds is the recent reform of our rice policy, an on-and-off effort of over 35 years, finally achieved by a strong and purposeful administration. Against wrong-headed populists and well-heeled profiteers, the Dominguez team and Congress passed The Rice Tariffication Law. This is transformational — in ending rice price-induced inflation, in reviving our moribund agriculture, in reducing malnutrition and poverty, in making our manufacturing sector more wage competitive. It will also stop NFA corruption and save taxpayers tens of billions annually.
There is now an opportunity for yet another milestone legislation. By amending the archaic Public Services Law (Commonwealth Act no. 146, 1936) we will open up the country to foreign direct investments in strategic sectors, such as transport and telecommunications, making such needed services more available, creating jobs, and improving the competitiveness of the Philippines. Increased foreign direct investments can also help finance the growing current account deficit. There is an opening in the resumed session of Congress in May to bring this to the finish line. Our Foundation for Economic Freedom urges the Executive and Legislative branches to give this top priority.
Romeo L. Bernardo is Vice-Chairman of the Foundation for Economic Freedom and GlobalSource Partners Philippine Advisor. He was Finance Undersecretary during the Corazon Aquino and Fidel Ramos administrations.