‘Drags’ to Philippines economic growth

By tradition, the Bangko Sentral ng Pilipinas (BSP) Governor addresses the Tuesday Club on its first breakfast meeting of every new year. Now on the 26th year of the Tuesday Club, this tradition is being carried out by incumbent BSP Governor Nestor Espenilla Jr. who, to his credit, continues to do so despite lately having fallen ill.

After a medical leave that took him to the United States for treatment, cancer-stricken Espenilla returned to work at his BSP office last Monday ending an extended medical leave since Jan. 4. The BSP chief was diagnosed with early stage tongue cancer last November.

Since he has to do some catch up work, Espenilla could not personally come to deliver his address to us at the Edsa Shangri-la in Ortigas, Mandaluyong City. He sent though a very excellent representative to literally break bread with us at the Tuesday Club. Espenilla designated one of his three BSP deputy governors, Dr. Ma. Almasara Cyd Tuaño-Amador to represent him yesterday.

Amador is the deputy governor of the BSP in charge of the Corporate Service Sector. As head of this sector, Amador exercises control over the Payments and Settlements Office; Management Services; Comptrollership; and Human Resource and Information Technology, among other tasks.

In a prepared speech read for him by Amador, the BSP Governor echoed the bullish outlook of our country’s economic managers on the Philippine economy for the year ahead. The BSP Governor is part of the economic managers’ team of President Rodrigo Duterte.

Aside from the BSP Governor, the Duterte economic team is composed of Finance Secretary Carlos Dominguez, Department of Budget and Management Secretary Benjamin Diokno and National Economic and Development Authority Director General Ernesto Pernia.

The economic managers earlier came up with a fearless forecast of seven to eight percent domestic growth for this year. The 6.5 to 6.9 percent target was missed last year, largely brought about by the declining growth of the Philippine agriculture.

Speaking for the monetary authorities, Espenilla vowed to pursue policies that are responsive to the changing environment with decisive and careful reforms conducive to achieving sustainable broad-based and strong economic growth.

According to Espenilla, the Philippine economy has remained resilient in the face of volatility, with the gross domestic product (GDP) expanding 6.2 percent last year.

“There is therefore basis for cautious optimism this 2019. But while we are sanguine about the future, vigilance is warranted,” Espenilla cited.

As the chief monetary authority, the BSP Governor takes on the job of safeguarding our country’s banking system and financial stability. The BSP’s role is also crucial in closely monitoring monetary factors that affect prices and inflation in the overall management of our country’s economy.

Looking back from last year’s average price forecasts, the economic managers missed to hit their two to four percent target range when inflation kicked up to 5.2 percent from 2.9 percent in 2017 due to higher oil and food prices as well as weak peso.

In fact, inflation peaked at a near-decade high of 6.7 percent in September and October. The BSP’s Monetary Board raised interest rates by 175 basis points in five straight rate-setting meetings from May to November last year to prevent inflation from spiraling out of control.

The BSP managed to pause from further tightening interest rates after inflation rate eased last December.

While the BSP does its own price stability measures, the actual monitoring of basket of goods to determine the behavior of consumer price index (CPI) is the function of the Philippine Statistics Authority (PSA). By Feb. 5 at the latest, the PSA is expected to come out with its monthly averages of CPI and inflation rate for January.

The BSP sees inflation returning to the two to four percent target at 3.2 percent this year and three percent in 2020.

Aside from a robust outlook for the Philippine economy this year, we were also glad to hear from the BSP deputy governor that Espenilla’s health prognosis is likewise getting better.

Whenever Espenilla goes on official leave, one of the three BSP deputy governors takes over the helm as officer-in-charge (OIC). This is why, Amador explained, there is continuity in office even as Espenilla went on medical leave for a short while.

Like Espenilla, Amador is a career executive official who rose from the ranks of the BSP. However in her case, Amador told us, she got out of BSP for two years when she served as a member of the Advisory Panel of the ASEAN+3 Macroeconomic Research Office based in Singapore from 2015 to 2017. She returned to BSP in January last year.

Amador holds a Doctor of Philosophy in Economics degree from the Australian National University. She took up her master’s degree at the University of the Philippines School of Economics and at the Graduate Institute of Policy Science in Tokyo.    

 She went through with ease from the intense grilling from business journalists and columnist members of the Tuesday Club like fellow STAR columnist Boo Chanco, Tony Lopez of BizNews Asia and businessman Eddie Yap of the Management Association of the Philippines.

Saying the BSP “cannot be a cheerleader” to brag about the country’s economic growth, Amador frankly admitted there are “drags” that weigh down the Philippine economy from taking off to much higher level than it can really achieve.

Amador pointed in particular the need to “financially empower” more and more Filipinos since 70 percent of the country’s economic growth is consumption-led. In fact, Amador is excited to see “a rising middle class” in the Philippines who are experiencing greater purchasing power for their hard-earned pesos.

She believes the Philippine economy is getting the needed push with more public sector spending on investments through the Build, Build, Build infrastructure program. A technocrat, Amador hopes the financial inclusion of more Filipinos would remove these “drags” to Philippine economic growth.