Worst of the pandemic is over: BSP chief

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said on Monday that with the obvious signs of a recovering economy, he is much more confident now that the most difficult period of the public health crisis has come and gone. has been.

“The worst of the pandemic is behind us,” Diokno told a forum. But it’s not over yet. “We are at a tipping point from the deep end caused by the COVID-19 crisis. Turning the wheel, of course, is a gradual process as we are not out of the woods yet. The pandemic has hit us hard ”.

“But now, we are seeing the first signs of recovery,” he said. “We expect our recovery process to continue as more industries reopen following the relaxation of quarantine measures.”

Diokno, a former budget secretary and former professor of economics at the UP, is now more confident that the economy is improving as industries and households have adapted, albeit slowly, to “new ways of doing things.”

He said that six months after the pandemic, Filipinos are better able to deal with the health crisis and still learn how to “live with the virus.”

“We are learning how to strike the delicate balance between saving lives and protecting livelihoods and businesses,” he said during the FINEX virtual conference on Monday.

Diokno cited the improvement in the manufacturing purchasing managers’ index from 27.5 in April to 50.2 in September, and the value and volume of production for the manufacturing sector is also better from March to July.

He also noted some other improvements, such as in funds transfers, investments, export / import trade and external accounts sector.

“Philippine remittances abroad have recovered with year-on-year growth of 7.7 percent in June and 7.8 percent in July, after declines in March, April and May. Equally encouraging is the turn of foreign direct investment (FDI) to a growth of 39.1 percent in May and 7.1 percent in June, “he said.

The BSP has a grim projection of a five percent contraction in remittances for this year due to the pandemic that also forced thousands of people earning Philippine dollars to return home. However, both remittances and FDI are expected to recover and improve in 2021. For remittances, the BSP expects a turnaround from four percent growth and FDI to rise to $ 6.5 billion from $ 4.1 billion estimated in 2020.

So far, to aid in the economic recovery, the BSP’s liquidity-enhancing actions now translate into

P1.5 trillion of fresh liquidity in the financial system.

“BSP has injected great liquidity into the financial system to soften the impact of the COVID-19 crisis on the economy,” Diokno said. “This injection of liquidity will be supported in part by the BSP’s newest liquidity management tool: the issuance of securities. With it, we will be able to further improve our ability to manage liquidity in the system, in accordance with our price stability mandate, ”he added.

For this year, the government expects gross domestic product “to range from a negative seven to nine percent range this year” and by 2021 and 2022, it will recover to a 6.5 to 7.5 percent range, Diokno said.

The economy will be supported by a manageable inflation environment that will remain within the target of two to four percent until 2022. During the October 1 monetary policy meeting in which the BSP decided to keep rates on hold, Inflation projections for 2020 through 2022 were lowered to 2.3 percent for 2020, 2.8 percent for 2021, and three percent for 2022.

“We are committed to using our entire arsenal of instruments, in accordance with the provisions of our Charter (BSP), in a timely manner to address the macroeconomic impact of the COVID-19 pandemic,” Diokno promised. He said the BSP is currently working with banks to “establish the enabling framework that will encourage private sector engagement in achieving balanced and sustainable growth.”