Amid expectations of slower growth this year, the Bangko Sentral ng Pilipinas (BSP) has committed to sustain its short-term financing arrangement with the national government and assist in economic recovery, Governor Benjamin Diokno said on Friday.
At the Washington-based Institute of International Finance’s (IIF) 2021 Asia-Pacific Summit, Diokno said the BSP had already released P2 trillion, or about 12 percent of the gross domestic product (GDP), into the financial system in support of the economy amid the prolonged pandemic-induced recession.Besides the liquidity support, the BSP has been extending a zero-interest, short-term loan through its repurchase agreement with the Bureau of the Treasury.
Asked if the BSP would further expand the current P540-billion facility, Diokno said “our newly revised target allows us to do that,” referring to the downscaled 6-7 percent GDP growth target for 2021.
Last Tuesday, President Duterte’s economic team slashed this year’s growth goal from 6.5-7.5 percent previously due to “emergence of new COVID-19 variants and the reimposition of enhanced community quarantine in the National Capital Region Plus area during the second quarter of the year.”
‘Not a permanent fixture’
The Development Budget Coordination Committee was referring to Metro Manila and the provinces of Bulacan, Cavite, Laguna and Rizal, comprising half of the Philippines’ GDP, which reverted to the most stringent lockdown level for two weeks after COVID-19 infections surged.
“The interplay between fiscal and monetary authorities is much needed during this pandemic,” Diokno said.
“We see this [BSP financing support] as needed at this time of the pandemic, but it will not be a permanent fixture in the interplay of fiscal and monetary authorities,” he said.
Diokno said an earlier-than-expected easing of quarantine restrictions alongside nationwide mass vaccination would facilitate growth this year.
Shrank by 4.2 percent
However, delays in reopening the economy remained the top downside risk to recovery in 2021, he added.
The GDP needed to grow by an average of 10 percent from the second to fourth quarters to achieve the full-year growth target after the economy shrank by a worse-than-expected 4.2 percent year-on-year during the first quarter, extending the Philippines’ recession to five straight quarters. This is the longest since the Marcos-era foreign debt crisis in the early 1980s.
Last year, the GDP shrank 9.6 percent—the worst post-war outturn.