The Bangko Sentral ng Pilipinas (BSP) said Friday it is enhancing its economic surveillance tools to improve the validity of information for policy recommendations and enable earlier warnings of potential scenarios.
BSP Deputy Governor Zeno Abenoja said these improvements are focused on three areas to boost the central bank’s real-time monitoring capabilities.
He said the BSP is incorporating “soft data” into its monitoring, surveillance and assessment, moving beyond purely traditional data.
“A lot of the traditional data that we use are very useful. It has the benefit that they have good coverage, [are] systematically connected, [and have] long time series. But we can improve them or supplement them with soft data,” Abenoja said.
He noted that soft data are more current, can contain forward-looking elements and offer granular details to better understand “hard” data in real-time.
The bank is also leveraging advancements in technology and economic literature, along with data sciences. This provides the BSP with increased computing power crucial for its operations.
“There is more information available on the internet. And we have the capability now of big data, data analytics, to gather all this information and make them more understandable and easier to digest, to guide policies,” Abenoja said.
The BSP said it is also refining how it communicates its assessments of economic developments on the ground, especially those that could influence future policies.
“One particular, very specific shift in terms of both the analysis and the communication is how we use scenarios,” Abenoja said.
This shift is evident in the central bank’s Monetary Policy Report, which no longer includes its inflation “fan chart.”
“Usually, just to provide a background, the fan chart captures a large part of our understanding on the limitations of our forecasting tools. Moving forward, we are less certain, so the errors propagate. So that defines a large part of the fan chart. So, we’re looking at something we know less of what’s going to be in the future,” he said.
Instead, the BSP is now developing scenarios that outline both potential worst-case and better inflation paths compared to current forecasts, he said.
