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Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said recent indicators suggested the Philippine economy was already approaching what he called its “tipping point” amid the coronavirus pandemic.
“At the moment, we are already at a turning point,” Diokno told attendees at the Citi Macro Conference – Philippines on Monday.
The financial website Investopedia defines a turning point as “an event that results in a significant change in the progress of a company, industry, sector, economy or geopolitical situation and can be considered a turning point after which a dramatic change, already be it with positive or negative results, it is expected to result. “
“The first signs of recovery include the growth of remittances in June and July from the falls of the previous months, as well as the growth of FDI (foreign direct investment) in May and June after the contractions [in] the previous months, ”Diokno said.
Personal remittances – personal transfers, either in cash or in kind, and capital transfers between households – increased in June for the first time in three months by 7.6 percent to $ 2.73 billion. This was followed by another 7.6 percent increase in July, putting these inflows at $ 3.08 billion.
Net FDI inflows fell 42.4 percent to $ 399 million in May before rising 7.1 percent to $ 481 million in June.
“The Purchasing Managers Index (PMI) improved from 27.5 in April to 50.2 in September. The value and volume of production for the manufacturing sector also improved from March to July, ”added Diokno.
The PMI takes into account new orders, production, employment, supplier lead times, and inventories in the manufacturing sector. Readings above 50 indicate expansion; below that, a contraction.
The governor of Bangko Sentral also said that the year-on-year contraction in imports had slowed from 65.3 percent in April to 24.4 percent in July. Meanwhile, the drop in exports slowed to 9.6 percent in July from 49.9 percent in April.
“Speaking of a turning point, the BSP is aware of the need for a careful disconnection from our [coronavirus disease 2019] response measures. We recognize that doing it too late or too soon can have serious repercussions on the economy, ”he added.
In the medium term, the central bank chief said, the economy is poised to become stronger, more technology-driven and much more inclusive.
“The intention is for all Filipinos to reap the benefits of economic development,” he added.
The Philippines plunged into a technical recession after domestic production fell by a record 16.5 percent in the second quarter and 0.7 percent in the first. This brought the contraction in gross domestic product (GDP) to 9 percent in the first half.
The government has an adjusted assumption of an economic contraction of 5.5 percent this year. He expects the economy to expand 6.5 to 7.5 percent next year.
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