Philippine seen to survive external headwinds

MANILA, Philippines – Monetary and fiscal authorities are confident the Philippines would survive external headwinds caused by tail events including the “Brexit,” the impending interest rate hike in the US, and the economic slowdown in China.

“We can argue that 2016 was a year wherein a number of tail events materialized,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr said.

Tetangco was the keynote speaker during the 2016 ING Finex CFO of the year award ceremony and the Security Bank economic forum 2016 that were held in Makati City yesterday. Philex Mining Corp. CFO bagged the 10th ING-Finex CFO Award for 2016.

“In both cases mainstream media underestimated the underlying sentiment which caused shockwaves across the globe. The same was the case in financial markets. Traders and analysts also got these all wrong. Fortunately, for financial markets, a turnaround from a wrong call can be quick,” Tetangco said.

 However, he explained the medium and long-term effects on the broader economy of tail events are not quickly turned around unlike sentiments in the financial markets.

With regard to the forthcoming assumption to office of president-elect Trump, he said authorities need to be vigilant over possible changes in tax laws, immigration policies as well as financial and business regulations.

“Offhand, we will keep an eye on possible impacts of shifts in immigration policies on remittances, as well as the prospects of sustained investments from US business process outsourcing companies,” Tetangco said.

The BSP chief said the economy grew 7.1 percent in the third quarter from seven percent in the second quarter, making the Philippines the fastest growing economy in Asia.

According to him, the country’s positive GDP growth for the past 71 quarters would be sustained.

“If you ask me, my answer is yes, our economy will continue to grow, based on what we see on the horizon. We have continued to move forward. I also believe we have sufficient buffers against external headwinds,” he said.

Latest data showed the country’s gross international reserves (GIR) stood at $85.75 billion in October, enough to cover 10 months’ worth of imports of goods and services. The level was also equivalent to 6.1 times the country’s short term external debt based on original maturity and 4.4 times based on residual maturity.

“We have a comfortable external liquidity position. The strength of the Philippine economy in general and the banking system in particular can be attributed to more than two decades of reforms,” he said.

Finance undersecretary and chief economist Gil Beltran said the government has ample fiscal policy space to increase spending specifically for much needed infrastructure investments.

The Duterte administration has raised the budget deficit ceiling to three percent of GDP instead of two percent as it intends to ramp up infrastructure spending to five percent of GDP.

“The strong balance sheet of banks, the BSP’s sizeable reserves, and the country’s lower exposure to foreign debt has fostered macroeconomic stability and will continue to provide the country more cushions to withstand external headwinds,” Beltran said.