...the Asian miracle

PH is more than ‘Asian miracle’–BSP

 

Manila Bulletin – Mon, Jun 2, 2014

The Philippines is prepared to take on the risks and challenges of transforming the ASEAN trade grouping into an integrated, powerful economic community, opined Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr.

 

While his words are echoes of past pronouncements, Tetangco reiterates though that the economic growth of the last eight quarters – consistently above six percent GDP -- is not something he would describe as a miracle.

During the recently held World Economic Forum on East Asia, which the Philippines hosted for the first time, foreign officials, delegates, and investors have commonly referred to the country as an Asian miracle, a term Tetangco said may not be appropriate.

“Many during the WEF (called) the Philippines a country turning the tide from being the sick man of Asia to the next Asian miracle. To be perfectly frank though, I do not relish that we are called a miracle,” said Tetangco before a gathering of the country’s retail investors and financial analysts.

“The evidence will show that we are where we are now because of hard-fought reforms.”

In the region and across its ASEAN peers, the Philippines remains one of the fastest growing economies. The first quarter GDP growth of 5.7 percent, although falling short of consensus estimate of six percent, is third highest in GDP rate after China and Malaysia.

“Analysts have described the Philippine economy as being in the ‘pink of health’ and this rosy picture is expected to continue through 2014-2015,” said Tetangco. Consumption and capital formation, he said, continue to be the main drivers of growth.

“Our growth story has been underpinned by solid anchors – low and stable inflation due to credible monetary policy and a sound banking system maintained through responsive regulation,” he said. Inflation has remained within target for five consecutive years.

Tetangco also pointed out that local banks continue to be well-capitalized with a capital adequacy ratio of well above the 10 percent requirement and the standard eight percent by the Banks for International Settlements.

“Likewise the adoption of Basel 3 in 2014 is expected to strengthen further the financial system,” he said.

Tetangco said the healthy external sector position continue to shield the economy and the domestic financial market against financial market volatilities after the US Federal Reserve commenced its tapering move last year.

With the US Fed taper of asset purchases in place, markets are now watching developments in growth and unemployment in the US, to see if the Fed will change the perceived path of the taper, and when the “lift-off” (or when Fed would raise rates) would be, observed Tetangco.

“In this period of uncertainty and market volatility, good surveillance is key,” he stressed. “The BSP will not hesitate to deploy contingency measures in response to sharp volatility in capital flows. With an expanded monetary policy toolkit and a broad-range of macroprudential measures to help ensure financial stability, we are optimistic that we are equipped to deal with potential market volatility.”

In the meantime, the country’s favorable external sector dynamics has improved external liability management. The current account has been in surplus for 11 consecutive years.

The favorable sentiment is a positive multiplier, said Tetangco. “Both consumers and businesses continue to express upbeat views about the Philippine economy's growth trajectory,” he added. The positive sentiments are indicative of the “broad support to the general direction of economic policies, and this is expected to fuel the momentum of reforms moving forward.”

With sustained positive developments in almost all sectors of the economy, the outlook in 2014 remains upbeat.

“We are optimistic that GDP growth will reach the government’s growth target of 6.5 to 7.5 percent for the year,” said Tetangco. He is also confident inflation will settle within the three percent to five percent target for the year.

“External sector dynamics will remain favorable, as trade is expected to rebound in light of expected global turnaround while remittances are seen to remain on a steady growth path,” the BSP chief said.