Philippine economy resilient to face post-pandemic world: DoF, BSP

MANILA – Finance Secretary Benjamin Diokno  told foreign investors and business leaders that the Philippine economy is resilient enough and that the government is doing its best to address post-pandemic challenges.

Diokno made the remarks during the Philippine economic briefing attended by the economic managers in Frankfurt, Germany that was streamed through various government agency Facebook pages.

In the same event, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla told foreign investors the Philippines’ inflation rate is on its way back within target in the second half of 2023.

Medalla told business leaders that the inflation rate in the country is now driven by supply-side factors from an initial impact of global-related issues.

He said the government has been doing its best to address the issue, and among the solutions include speeding up the importation of several agricultural products such as rice, sugar and meat.

Medalla said there are already signs that inflation is normalizing, with month-on-month level already decelerating.

“Unless there is a large shock again that’s associated with the weather, we do not see the shocks propagating into a self-fulfilling prophecy because of our very aggressive monetary policy,” he said.

BSP’s policy-making Monetary Board (MB) hiked the central bank’s key policy rate by a total of 350 basis points last year after rate of price increases breached the government’s 2-4 percent inflation target band starting April last year.

The Finance chief noted that inflation is also a concern in the Philippines just like in other countries, but measures are being undertaken by the government to address the issue, such as managing prices by ensuring adequate supplies of agricultural products, and boosting the agriculture sector’s capacity and productivity to help address the rising commodity prices, among others.

“We also are continuing the importation of necessary commodities to ease inflation,” he said.

The government has allowed the continued importation of rice, sugar, and meat, which are among the primary factor for the elevated food prices due to supply issues.

Relatively, Diokno assured investors that the government has put in place a fiscal consolidation program to address the uptick in government liabilities, due in part to the increased borrowing to finance pandemic-related programs.

He identified three factors that will support the government’s fiscal consolidation and one of this is the fact that “only a small fraction of our outstanding debt is exposed to interest rate resetting.”

This, as bulk of the government liabilities are sourced from domestic fund sources, with around 75 percent of the borrowing program allocated to the domestic market.

“We already have anticipated the tightening monetary policy conditions when we formulated the interest rate payments in the 2023 budget,” Diokno said.

He added that “government securities market is dominated by local players that are bank-centric and homogeneous in investment governance.”

These, he said, are strong backing for the government’s fiscal consolidation.

“We are confident that the Philippine economy has the ability to navigate the post-pandemic world amidst the strained global conditions,” Diokno added.