PH resilient despite volatility-A A +A
By Mia A. Aznar
Sunday, July 28, 2013
THERE may have been volatility in the financial markets recently, but a key official of the Bangko Sentral ng Pilipinas (BSP) is confident that the Philippines has proven its resilience against some of the toughest economic environments in years.
Dr. Ma. Almasara Cyd Tuano-Amador, assistant governor of the Monetary Policy Sub-sector of the BSP, was the key speaker at the mid-year economic briefing of the Cebu Business Club last Friday.
Amador told participants the country has experienced broad-based economic growth, a robust external payments position, favorable alignment of solid growth and low inflation, a sound and stable banking system and is backed by prudent monetary policy supporting its economic activities.
And although some volatility has been seen lately, Amador expects broad stability in the financial markets over the longer term.
She said that a combination of fiscal reforms and prudent liability management allows for a growing revenue base to spend on critical social and economic priorities, especially infrastructure. The infrastructure budget from 2012 to 2013 rose 52.7 percent, which Amador says spells well for future growth in the long term.
Amador identified four things that will bode well for the economy–its demographics, which will support domestic demand and production, Mindanao’s development potential, the expansion of Asian trade due to the upcoming integration, and the favorable business and consumer sentiments and gains in competitiveness brought about by reform.
By 2015, the Philippines will be entering its demographic window, where the majority of the population will be of working age and there will be less people who are dependent on others.
Those in the working age will be both producers and consumers, which is typically associated with accelerated economic growth, with an average growth of 7.3 percent over a 10-year period.
However, Amador said this population needs to have opportunities available to them if the country wants these growth numbers. If they are unable to find jobs, Amador said they will just be unproductive bystanders.
As for development in Minanao, she said there is a lot more potential that can be gained in the areas of tourism, Halal food production, agriculture and mining. Its strategic location that makes it closer to Southeast Asian neighbors makes it ideal for tourism and Halal production.
With high business and consumer sentiments, Amador believes the reforms that have been put in place could be permanent, even after the current administration turns over the leadership to another.
She said it would be “political suicide” to reverse the reforms that have been placed, as the public has seen tangible benefits from these reforms. She also cited third party assessments showing improvements in governance and competitiveness indicators.
The World Economic Forum saw improved institutional environment for the Philippines, causing it to rise 23 slots while the Heritage Foundation placed the country 18 slots higher for increased economic freedom. Transparency International’s reduced corruption perception has jumped 10 places while the Worldwide Governance Indicators saw improved government effectiveness in the country and improved the country’s ranking four places up.
“Admittedly, these are baby steps but steps in the right direction,” she said.
She added that the credit rating upgrades from ratings agencies have been well-earned.
While the ratings upgrade came about recently, she said the markets already voted the country investment grade early on.
The ratings upgrades, she said, only recognizes that the the country can sustain it.
However, Amador warned that the time to be extra careful is when everything seems to be doing well.
Some challenges to the economic outlook include the ebb and flow of foreign capital that leads to volatility in the financial markets, the period of slow global growth, gaps in infrastructure and financial inclusion.
She assured that at the BSP, they do their best to always come up with the worst possible scenario to deflect any negative impacts.
She explained that the country’s policymakers are wary about a repeat of the Asian financial crisis that they have worked out sufficient policies in place. She added that they also do their best to communicate the most recent developments, saying markets tend to overreact as it dislikes uncertainty.
Still, she said the Philippine economy is “well-positioned to ride out volatility” as she believes the market will continue to expand, although the growth differential could narrow.
Amador admitted that majority of the Filipinos don’t save, citing too high minimum balance requirements and imposing bank buildings. The Finance Survey of the BSP found only two out of 10 households have bank accounts while eight in 10 deposit accounts are in commercial banks.
She said poverty and financial illiteracy are main causes of the lack of financial inclusion.
Published in the Sun.Star Cebu newspaper on July 29, 2013.