THE PHILIPPINES should be able to weather a US recession and global economic slowdown, a senior central bank official told reporters on Thursday, citing scope for monetary authorities and economic planners to sustain rapid domestic-driven growth.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said robust domestic consumption should carry the economy through a potential US recession and an economic slowdown in Europe and China.
Signs of a possible US recession — as borne by inverted US Treasury yield curves as longer tenors fetched lower rates — and of a looming economic slowdown elsewhere have battered financial markets lately.
“The Philippines has sufficient space to address these important global challenges. In the broader sense, the economy continues to be resilient,” Mr. Guinigundo said in a press briefing yesterday.
“The trend of monetary policy is of course towards easing, and many countries with flexibility, I think, are more sanguine about being able to address these challenges.”
The United States Federal Reserve dialled back with dovish signals in last week’s policy meeting, saying it was no longer eyeing rate hikes for the rest of 2019 in order to support US economic activity. A low interest rate environment is expected to support economic activity by encouraging businesses to invest and households to spend.
For the Philippines, Mr. Guinigundo reinforced signals from newly seated Governor Benjamin E. Diokno that the BSP also sees ripening conditions for interest rate cuts.
“Assuming that inflation continued to come down and is firmly entrenched in the 2-4% target of both the BSP and the government, that will provide some flexibility for the monetary authorities to consider easing monetary policy. But of course, this is something that will require careful assessment of the data,” Mr. Guinigundo said.
The BSP kept interest rates wthin the 4.25-5.25% range in its March 21 policy review, saying that monetary authorities need to observe price trends even as inflation has been on a decline since November last year.
From a nine-year peak of 6.7% in September and October last year, inflation slowed in succeeding months to a one-year-low 3.8% in February, the first time in 12 months that the rate returned to the target band.
Mr. Diokno has said that he sees room to ease key rates, even as he noted that the BSP will first have to watch if the slowdown in price increases will be sustained. The BSP now expects full-year inflation to average three percent, a sharp drop from 2018’s 5.2%.
Mr. Guinigundo also said some $82.78-billion reserves and a “flexible” peso exchange rate provide buffers against external shocks, while a healthy, “sustainable” fiscal balance should help sustain overall economic expansion. — Melissa Luz T. Lopez

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