The Philippines’ economy still requires continuous monetary policy support, according to Diokno.
Because of the impact of the epidemic and other foreign variables, the domestic economy still requires continued monetary policy support. Inflation is high, and growth remains fragile.
Governor Benjamin Diokno of the Bangko Sentral ng Pilipinas (BSP) said the central bank maintained its accommodating monetary policy settings last quarter “primarily to support the economy’s embryonic recovery” in a speech aired live on the central bank’s Facebook page on Thursday.
Because of growing international commodity prices, the influence of weather disturbances, and the delayed recovery from the African swine fever outbreak, he said the inflation prognosis remains positive.
“In light of this, ongoing monetary policy assistance is critical in boosting private demand and encouraging banks to lend, allowing the economic recovery to acquire pace,” he said.
“Further traction from non-monetary government initiatives to directly address supply-side inflation pressure,” Diokno added.
This aspect, he noted, gives monetary authorities “flexibility in maintaining policy support for the economy.”
“Looking ahead, the economy’s progressive reopening will be aided by the continued drop in Covid-19 (coronavirus disease 2019) infection cases due to faster vaccine deployment and more effective granular lockdown.” Continued fiscal support, universal vaccine access, and proper containment tactics will all be key in improving productivity and resuming the economy’s overall growth trajectory,” he said.
Central banks in advanced economies, according to Diokno, have begun re-evaluating their separate monetary policy settings in light of the impact of increases in global commodities prices due to improved demand and supply bottlenecks.
“The BSP, on the other hand, is optimistic that the Philippines is well-positioned to rebound even if global financial conditions tighten,” he said, adding that the central bank still has “a complete range of policy tools at our disposal.”
The ability to join the foreign currency market to handle excessive volatility and macroprudential measures to deal with “particular imbalances and prevent the build-up of hazards in the financial system” are among these policy options.
Because of durable inflows such as remittances from Overseas Filipino Workers (OFWs) and the business process outsourcing (BPO) industry, he said the Philippines continues to have considerable foreign exchange reserves, which amounted to roughly USD107.16 billion as of end-September 2021.
“To summarize, the BSP’s policy actions in the third quarter were consistent with its commitment to macroeconomic stability. We will maintain our data-driven approach to attaining the BSP’s fundamental objective of ensuring price and financial stability that is conducive to the economy’s balanced and sustained growth,” he added.