Bangko Sentral ng Pilipinas Governor Benjamin Diokno disagrees with the International Monetary Fund’s downgrade of growth forecast for the Philippines and is confident that the economy actually would grow to 4 to 5 percent this year and 7 to 9 percent in 2022.
BANKING on his familiarity with the local terrain and the real situation on the ground, Bangko Sentral ng Pilipinas Governor Benjamin Diokno has refuted the downgrade by the International Monetary Fund of Philippine growth targets for this year and next year.
Instead, he declared that he is optimistic about Gross Domestic Product (GDP) hitting 4 to 5 percent this year and 7 to 9 percent in 2022.
To recall, the IMF has earlier downgraded the growth forecast of the Philippines GDP to 3.2 percent this year and 6.3 percent in 2022.
Recession exit
Interviewed by Bloomberg TV, Diokno said after exiting the pandemic-induced recession with an 11.8 percent GDP growth in the second quarter, GDP expanded anew in the third quarter.
“We’re confident that the third quarter will be positive,” he said adding that BSP is still confident that revised targets would be achieved.
Very confident
“I don’t see whether there’s a lot of weight that you can give to forecasts nowadays because things are really subject to a lot of uncertainty,” he said.
“But we’re very confident now with our revised forecast. Why? Because we have accelerated our vaccination program, which to me is the key to recovery,” the BSP chief added.
Accelerated vaccination
Diokno’s apparent confidence emanates from the accelerated national vaccination program and the continued arrival of Covid-19 vaccines, which could bode well for the country as they will fast track the full reopening of the economy.
As of Oct. 11, the Philippines has already received 87.69 million COVID vaccine doses.
Data showed 21 percent or 23.18 million Filipinos are already fully vaccinated, while 24 percent have received their first dose.
“In Metro Manila alone we have vaccinated 80 percent of adult population and we’re going to start vaccinating the young ones aged 12 to 17,” he said, adding the government has placed orders for about 107 million doses from various suppliers.
Past numbers
Diokno said the recent forecast of the IMF may be based on past numbers.
BSP would continue to keep an accommodative monetary policy stance to allow the recovery that remains fragile to gain more traction, Diokno said.
Diokno said inflation is seen decelerating back to within the BSP’s two to four percent target toward the end of the year and average 4.4 percent this year, before easing to 3.3 percent next year and 3.2 percent in 2023.
Record lows
The Monetary Board has kept interest rates at record lows for seven straight rate setting meetings since November last year as it vowed to do whatever it can to help the economy fully recover from the pandemic-induced recession.
“It’s not that we don’t want to move the rate, we just feel that the current policy rate is appropriate for the current situation, while there is a strong recovery, I would say because the economy has recovered,” the BSP chief added.
He said exports grew by 21 percent and imports jumped by 31.4 percent, while foreign direct investments increased by 14.7 percent in the first half of the year.
Nascent growth
“So there’s a lot of progress. But on the interest rate, we feel that the growth is still nascent, you have to take care that it is sustainable. So the Monetary Board has decided that the current policy rate is appropriate, given that inflation is manageable,” Diokno said.
ING Bank Manila senior economist Nicholas Mapa said the overall growth pace still lacks momentum to close out the year as partial lockdowns were reinstated across portions of both the third and fourth quarters.
“The IMF downward revision to GDP reflects the view that growth momentum has slowed considerably after the initial reopening of the economy last year. The Q2 GDP year-on-year growth was largely base effect driven while quarter-on-quarter GDP growth actually contracted,” Mapa said.
Despite improvements in mobility and vaccination levels, Mapa pointed out the Philippines does not resemble an economy on the mend yet even as it sees the GDP expanding by 3.7 percent this year.
“By and large, the economy is still in recession and it will take a much more convincing bounce back to exit from this prolonged downturn,” Mapa said.
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