THE Philippines has enough monetary and fiscal policy space to deal with the economic challenges it faces, central bank Governor Benjamin E. Diokno said in his first speech of the year.
Driven by domestic demand, the archipelago’s economy is in a position of strength despite global and domestic challenges, Mr. Diokno told the Rotary Club on Thursday in Manila. Authorities are “cautiously optimistic” that this year’s economic performance will be better than last year, he said.
“Similar to other countries, the Philippines is exposed to external headwinds and domestic risks,” he said. “But we are optimistic that robust domestic demand and healthy external payments position will continue to support our economy and serve as buffers against external headwinds.”
The government is forecasting growth of 6.5%-7.5% this year, compared with an estimated 6%-6.5% in 2019.
The central bank lowered its key interest rate by 75 basis points (bps) in 2019 to help support the economy, reversing part of the 175 bps of rate hikes the year before. While Mr. Diokno has said the bank has room to cut more this year, he said Thursday the monetary board believes the current policy settings are appropriate.
“We continue to remain on top of developments, and stand ready to use all possible policy tools in our arsenal to address any external or domestic shocks,” he said.
With tensions between the US and Iran at a boil over last week’s assassination in Iraq of a high-ranking Iranian general, Mr. Diokno said the central bank is prepared to address any external shocks. The standoff could have an impact on remittances from the region — a key support for the Philippine economy — though Mr. Diokno earlier this week said the tensions weren’t likely to have a lasting impact on inflation, and warned against alarmism.
The Middle East is the Philippines’ main destination for land-based workers, with more than one million Filipinos deployed there each year, according to government data. The region is the second-largest source of cash remittances from overseas workers, central bank data show. — Bloomberg