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Benjamin Diokno |
In an exclusive Q&A with The Asset, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno discusses the lessons learned from the pandemic and what the government and other sectors of society should do to address the challenges. of the post-Covid world.
(Last in a two-part series)
Q. Given that we include Covid-19, eventually, what are the most significant changes that you consider important for the country? Do you think the role of the government / central bank / public sector will likely change after this crisis? If so, how?
A. A “New Economy” is expected to result from the Covid-19 pandemic as individuals, businesses, government institutions and other entities heed the lessons learned to build a better and safer world.
First, individuals, businesses, and other entities will increase their dependence on technology for their daily lives and operations. E-commerce will grow in importance in the “new economy” of the Philippines, as businesses and consumers increase the use of online platforms, including cashless payment systems. Work-from-home arrangements, which will be the norm for some even after the pandemic, will also drive demand for digital technology. All of these must be backed by a secure and reliable digital infrastructure system with strong and reliable cybersecurity protection.
The role of ICTs will be critical in the efficient and reliable delivery of goods and services, including government cash transfer programs for vulnerable members of society.
Second, the The Covid-19 pandemic is further enhancing collaboration between interested entities in the country.
There will be close coordination between the national government and the BSP in the implementation of fiscal and monetary response measures.
Central banks play a critical role in maintaining the stability of global financial markets and the flow of credit to the economy. – as liquidity constraints could easily turn into insolvency during crises. On the other hand, the national government, through fiscal measures, has the capacity to provide direct support to vulnerable sectors.
National governments and central banks should coordinate well and leverage their respective strengths and mandates to maximize the chances of recovery, and this is something we are seeing in the Philippines.
Meanwhile, cooperation between the national government, local government units, the private sector and civil society is also important to enable recovery action by the whole of society. The Covid-19 crisis has taught us practical and relevant lessons on preparedness and the value of integrating all government and private initiatives to address global and national issues.
In the Philippines, relief measures coordinated by the government and BSP, as well as the proactive response of the private sector – as evidenced by altruistic actions towards vulnerable sectors – they are helping the nation face the crisis and position itself for short-term recovery.
Third, it is necessary rapid implementation of the national identification system. Having a national identification system could facilitate the rapid and efficient delivery of government services, including cash transfers to vulnerable sectors in times of crisis.
A national ID system also helps speed up the financial inclusion process. With it, everyone has proof of identity, which is a Know Your Customer (KYC) requirement from banks, so access to financial services expands.
Following the passage of the Philippine Identification System Act, a national identification system will soon be fully operational in the country.
Q. What are / are the most important lessons / conclusions you believe as a result of this global pandemic?
A. The Covid-19 pandemic is an unprecedented event that paralyzed the global economy, erasing any possibility of growth this year. However, like most global economic crises, it provides important lessons for governments in terms of preparing for crises of the same scale in the future.
First is the importance of building enough shock absorbers during good times. The Philippines has entered the crisis in a position of strength, with a low debt burden, a stable banking sector, manageable inflation and healthy external accounts following the implementation of structural reforms in the last two decades. Fiscal and monetary space has enabled the government and the BSP to implement decisive, swift and massive relief and mitigation measures without fear of a debt explosion.
Furthermore, a sound macroeconomic and political environment is also vital to ensure business continuity for banks and other financial institutions, which have to meet the financial service needs of the public in times of crisis.
Second, the government has to encourage the use of science and technology in health and other policy-making areas. Government monitoring and evaluation systems need to be strengthened for policy responses and actions. The Covid-19 pandemic highlights the different vulnerabilities among segments of the population. In all settings, the poor are most at risk and less equipped to cope with the health and economic impacts of the pandemic.
Given these unprecedented circumstances, the government must be able to monitor the progress of its policies, account for the resources used, and ensure that the benefits of government action are well distributed. The government must also be ready to take action if the evidence warrants it. Without these capabilities, governments will not be able to adequately assess how their policies affect people and risk leaving the most vulnerable to bear a disproportionate burden of consequences.
Third, A resilient workforce pays off. Strengthening the education system and harnessing the country’s demographic dividend by upgrading the skills of the current and future workforce will further strengthen the ability of Filipinos to survive future crises.
As the Philippines continues its battle against Covid-19, as well as its impact on lives and livelihoods, the BSP will remain one with the government and the entire nation in its work towards a strong recovery.
As part of The Asset’s coverage of the Philippines, we are hosting a webinar on innovations in the Philippine capital markets. For more information about this virtual event, click here.
