BSP: Timely, broader vaccination to prevent deeper economic scars

MANILA, Philippines — The timely and extensive access to vaccines is crucial in preventing deeper economic scars, boosting demand and shoring up confidence amid the emergence of COVID-19 variants in the country, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said.

He said the successful rollout of COVID-19 vaccines is of paramount importance for the Philippine economy to recover.

“As the government’s vaccination program continues to gain momentum, we can expect business and household sentiment to improve and thus drive a rebound in spending, employment and consumption,” Diokno said.

“Looking ahead, the overall stance of monetary policy will remain oriented toward preserving ongoing policy support to fuel the momentum of economic recovery.”

The BSP chief said the conduct of monetary policy would remain data-driven and monetary authorities would remain vigilant against emerging risks that may arise from domestic and global developments.

Economic managers see the economy bouncing back with a gross domestic product (GDP) growth of six to seven percent this year after the country slipped into recession with a record 9.6 percent contraction last year.

The pandemic-induced recession extended to five quarters as GDP shrank by 4.2 percent in the first quarter owing in part to the government’s calibrated approach in mitigating the transmission of the virus.

“Higher frequency indicators of domestic demand also suggest a recovery in economic activity with the gradual easing of lockdown restrictions. However, downside risks to the outlook for growth persist, as the emergence of more transmissible COVID-19 variants continues to temper market sentiment and threatens to delay the full reopening of the economy,” Diokno said.

According to Diokno, the BSP needs to preserve monetary policy support in order for the economic recovery to gain more traction.

“We believe that the prevailing monetary policy stance remains appropriate, especially as price pressures are expected to dissipate further with the continued implementation of non-monetary supply-side measures by the government. Keeping an accommodative stance shall also help counteract risk aversion among banks, which continues to temper lending activity despite ample liquidity in the financial system,” he said.

BSP managing director Zeno Ronald Abenoja said average inflation slowed to 4.3 percent in the second quarter from 4.5 percent in the first quarter as non-monetary interventions eased domestic supply constraints.

“Inflation is projected to settle near the upper end of the government target in 2021, return to the midpoint of the target in 2022 and 2023. Risks to the inflation outlook remain broadly balanced,” Abenoja said.

BSP... From B1

Abenoja added there are encouraging signs of recovery amid indications of improved business sentiment and less negative domestic growth.

“BSP affirms its support to the economy for as long as necessary to ensure its strong and sustainable recovery,” Abenoja added.

New York-based Fitch Ratings said the continued outbreaks in Southeast Asian countries including the Philippines, Thailand and Vietnam have set back recovery prospects.

Fitch said rating strains are already evident in the Philippines leading to the revision in the outlook on the BBB rating to negative from stable early this month.

It said the Philippines has not been as badly affected as some others in the region by the latest infection wave, but its economic contraction in 2020 was particularly deep.

“We believe there will be downside risks to medium-term growth prospects as a result of potential scarring effects, as well as possible challenges to unwinding the exceptional policy response to the health crisis and restoring sound public finances as the pandemic recedes,” the debt watcher said.