Bangko Sentral ng Pilipinas Governor Benjamin Diokno said he remains optimistic on the growth prospects of the Philippine economy but said some reforms should be pursued to ward off the negative impact of external risks.
He said such external risks included the slowing global growth and the lingering trade tensions between the United States and China.
Diokno said while the external environment was challenging, he was “cautiously optimistic” about the current state of the Philippine economy.
“Keeping our house in order remains the first and best line of defense. We are improving economic openness through liberalization of trade and foreign direct investment, we are enhancing external competitiveness by strengthening domestic industries; we are diversifying products and markets to non-traditional growing economies; and we are sustaining domestic economic resilience by building adequate buffers,” Diokno said in a speech during the Rotary Club of Manila centennial celebration on June 6.
“These are some of the policy actions and reforms that we can pursue or continue to pursue in order to ward off the potential negative effects of external shocks, especially from rising protectionist measures and heightened policy uncertainty,” he said.
He said local monetary authorities continued to recognize the uncertainty in the global economic environment, with the International Monetary Fund further revising down its global growth prospects due to volatilities in commodity prices, uncertainty over advanced economies’ policy normalization and the ongoing trade tensions as a result of the US-China trade war.
Diokno said that on the trade war, there was no direct imposition against the Philippines in terms of the country’s exposure to the products imposed with tit-for-tat measures between the US and China. But the extent of the impact would depend on the industries affected, he said.
He said the Philippines could possibly boost exports of food and agricultural products to the US, taking advantage of the tariffs imposed on Chinese goods of similar nature. The same goes for US agricultural goods imposed with steep tariffs by China, he said.
“We see one positive impact that the US-China trade war could have on the Philippine electronics industry. That is if companies on either or both of the countries use the Philippines as an alternative manufacturing site. This scenario, however, would take time and the Philippines would have to compete with other potential relocation sites like Vietnam and Indonesia,” he said.
Diokno said the continued trade friction could negatively affect overall investment sentiment and increase caution and uncertainty in the global growth prospects. This could take its toll on the country’s external sector.
“Nevertheless, given that the economy’s growth is mainly driven by domestic demand, the trade friction would have limited negative impact on Philippine exports,” he said.
He said the economy remained sound and its prospects were bright. He mentioned the factors that continued to strengthen the country’s resilience and stability in the face of external risks.
Among the Asean-5 economies, the Philippines will continue to be one of the strongest in the region and seen by the IMF to grow this year by 6.6 percent, Asian Development Bank by 6.4 percent and the World Bank by 6.4 percent.
Diokno said the Philippines would continue to outpace Indonesia, Malaysia and Thailand.
