Maintaining balance amid change

Change brings with it many challenges, especially in a difficult and unpredictable environment.

Finding strong and effective leadership in the midst of today’s turbulent economic environment is no easy feat for even the world’s most powerful governments and institutions. Financial uncertainties, such as energy security issues due to geopolitical conflict or sky-high inflation due to a myriad of other factors, compound the already difficult nature of the changeover process.

A well-balanced mix of experience, innovation, and resilience is needed to safely navigate such challenges, and delicately maintain the balance between growth and prudence.

President Ferdinand R. Marcos, Jr. had recently selected Eli M. Remolona to serve as the next governor of the Bangko Sentral ng Pilipinas (BSP) for a tenure of six years.

Starting this month, Mr. Remolona who currently sits on the seven-member policy-making Monetary Board, will take over for Felipe M. Medalla, the previous central bank governor.

“With his extensive experience and remarkable achievements in central banking, economic policy, international finance, and financial markets, Mr. Remolona brings a wealth of expertise to his new role,” the Presidential Communications Office said in a statement.

Part of this experience was a total of 33 years spent at the Federal Reserve Bank of New York and the Bank for International Settlements (BIS).

Mr. Remolona had previously replaced Mr. Medalla on the Monetary Board when Medalla was appointed governor of the central bank last year.

He was also the Chair of the Risk Management Committee and an Independent Director of the Bank of the Philippine Islands (BPI) prior to joining the BSP.

He also served as a professor of finance and the director of central banking at the Asia School of Business in Kuala Lumpur, a partnership with the MIT Sloan School of Management.

As the BIS regional director for Asia and the Pacific from 2008 to 2018, he worked closely with the 12 top central bank governors in the region to develop policy on topics like financial regulatory reform, the growth of capital markets, and financial stability. He also oversaw BIS reserve management for Asia-Pacific central banks.

It is clear that Mr. Remolona has many eyes watching his next move.

The administration of his predecessor, Mr. Medalla, has largely been responsible for steering the country away from the economic slump affecting most of the world. Mr. Medalla took over the monetary authority to complete the previous governor Benjamin Diokno’s unfinished tenure after he had left the position to assume the role of Finance Secretary.

Since then, the BSP has had to contend with skyrocketing inflation by keeping the most aggressive monetary tightening cycle in years. The key policy interest rate currently sits at 6.25%.

Fortunately, Mr. Medalla thinks that is enough. Future policy choices by the central bank, he said, will mostly be influenced by inflation statistics, which, based on current projections, is expected to return to the bank’s goal range of 2%–4% by the fourth quarter.

“We expect inflation to correct to within target or [revert to] below 4.0 percent by November or December this year,” Mr. Medalla said in a speech to Money Market Association of the Philippines.

“But even if it happens in September, it is 18 straight months of inflation being higher than 4.0 percent, which is [the upper band of] our target. [Again, that is] 18 straight months of above-target inflation.”

As of May, inflation slowed for the fourth straight month to 6.1% from 6.6% in April, but it remained above the BSP’s 2%-4% target range.

“The good thing, though, is we have not lost credibility [as an inflation-targeting central bank] because everyone knows it is [inflation is driven by] supply-side [pressures]. Everyone knows we have clearly addressed it quite aggressively,” he said.

BSP Former Governor Felipe Medalla (center) watched as Pasig City Mayor Vico Sotto (left) scanned a QR code to pay for halo-halo during the launch of the “Paleng-QR Ph Plus” in the city’s Mega Market on March 3. Over 2,000 vendors at the Pasig City Mega Market have joined the Paleng-QR Ph Plus program. — Photo from Bangko Sentral ng Pilipinas

Mr. Medalla also did much to continue Mr. Diokno’s commitment to digitizing the Philippine financial system. In the same speech, Mr. Medalla pointed out that InstaPay transaction volumes had already exceeded automated teller machine transactions.

“PESONet [transactions], sooner or later, will overtake [the volume of] checks,” he said.

“In addition, we have great dreams of making the system even better. We have our so-called Paleng-QR. The goal is [for] merchants and even transportation [operators] to be paid by means of a QR (quick response) code.”

“The vision is, you can do this wherever you are in the ASEAN (Association of Southeast Asian Nations). That one is a little further away because you have the exchange rate. Cross-border payments are generally far more complex, but that dream will probably be true in two to three years,” he said.

According to him, at least five countries in the ASEAN-5 are working on this project, including Singapore, Indonesia, Malaysia, Thailand, and the Philippines.

“We will [aim to] have a single QR for the entire system, or at least in the case of ASEAN, you have different QR systems, but they have enough commonalities to be interoperable.”

Whether Mr. Remolona can keep the momentum going, only time can tell.

Finance Secretary and Former BSP Governor Benjamin E. Diokno expressed his strong confidence in Mr. Remolona and said that he would be able to unwind BSP’s aggressive policy tightening in his tenure.

“I cannot speak for his pace. But that’s easy. Even before, we have an unwinding strategy,” Mr. Diokno said in mixed English and Filipino.

“Monetary policy is his life. I think he’ll do well. He is advising other central bankers in Asia-Pacific, he understands the nature of the job.”

The appointment of Mr. Remolona as the new BSP director was likewise praised by the Bankers Association of the Philippines (BAP).

“The BAP looks forward to working with incoming Governor Remolona on various initiatives impacting the banking industry and its stakeholders, whether it be in the areas of financial market development, cybersecurity, or sustainability,” BAP President and BPI Chief Executive Officer Jose Teodoro K. Limcaoco said in a statement. — Bjorn Biel M. Beltran