Economic team confident of sustained GDP growth

Pacifying investors over Duterte remarks

MANILA, Philippines – Economic managers and monetary authorities are assuring investors the country’s macroeconomic fundamentals  remain solid amid the tirades made by President Duterte against US President Barack Obama, UN Secretary General Ban Ki-moon, and the European Union over his all-out war against illegal drugs. 

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said in a speech before bankers, traders, brokers, fund managers, and underwriters Thursday the Philippines is in a relatively strong position compared with many advanced economies and emerging market economies. 

Tetangco was guest of honor at the joint general membership meeting of Money Market Association of the Philippines (MART), ACI Philippines, Investment Houses of the Philippines (IHAP), Trust Officers Association of the Philippines (TOAP), National Association of Securities Broker Salesmen Inc. (NASBI), and the Fund Managers Association of the Philippines (FMAP). 

He pointed out the Philippines have had 70 consecutive quarters of positive gross domestic product (GDP) growth since 2009.  

The country’s GDP expansion accelerated to seven percent in the second quarter of the year from 6.8 percent in the first quarter amid the strong boost from election-related spending.

This brought the average GDP growth to 6.9 percent in the first half of the year or closer to the higher end of the six to seven percent target set by economic managers. 

On the other hand, inflation remained manageable averaging 1.5 percent in the first eight months of the year – well within the two to four percent target set by the BSP. 

“The strengths of the Philippine economy are plentiful, in contrast to other key emerging economies elsewhere. Domestic demand conditions are supported by solid private household consumption and investment; buoyant business and consumer sentiment; and adequate credit and domestic liquidity,” he said. 

According to him, current estimates also point to a continued productivity growth in the medium term, backed by upbeat domestic demand and favorable demographics.  

He also cited recent banking sector indicators continued to indicate solid asset growth, improving quality of loans, and capitalization above international norms.

 “Clearly, we are standing on a solid foundation… And, we can further build on that foundation by strengthening our institutions. In particular through capital market reforms,” Tetangco added.

 The BSP chief explained pressures from both external and developments continue to affect the markets. Foreign funds have been flying out of the Philippine Stock Exchange (PSE) via massive while the peso is nearing the 48 to $1 level. 

He said pressure points are policy actions of central banks in advanced economies including the US, Japan, Europe, among others. 

“We look at the bigger picture in calibrating our policies to promote stability. We look at the pressure points from both the external and domestic sectors, and then adjust our tools accordingly,” he said. 

The BSP’s Monetary Board kept the country’s policy stance unchanged last Thursday.

 S&P Global Ratings earlier said there will be no higher rating for the Philippines over the next two years amid the country’s lower middle-income economy as well as rising uncertainties surrounding the stability, predictability, and accountability under the Duterte administration. 

The debt watcher retained the ‘BBB’ rating of the Philippines on the back of a stable outlook. The rating is one notch above investment grade. 

S&P, however, noted President Duterte has a strong focus on improving “law and order,” which has allegedly resulted in numerous instances of extrajudicial killings since he came to power.  

“We believe this could undermine respect for the rule of law and human rights, through the direct challenges it presents to the legitimacy of the judiciary, media, and other democratic institutions,” the rating agency said.  

“When combined with the president’s policy pronouncements elsewhere on foreign policy and national security, we believe that the stability and predictability of policymaking has diminished somewhat,” S&P said.

Finance Secretary Carlos Dominguez III argued the Duterte administration’s economic pronouncements anchored on its 10-point socioeconomic agenda have been clear and consistent from the very beginning.

“The Duterte administration is loud and clear in its message. If one is able to see through the noise created by negative headlines, he may have better and comprehensive understanding of the exciting, positive changes that are ahead of the Philippines,” he said