Bangko Sentral ng Pilipinas Governor Benjamin Diokno said over the weekend the bank is ready to deploy the necessary measures to shield the economy and the financial markets from the impact of coronavirus disease 2019.
“The Monetary Board is ready to deploy any or all its policy tools, as appropriate, to address all challenges to our own financial markets and growth prospects,” Diokno said in a statement.
He said as the coronavirus breakout was a public health crisis—not an economic crisis—the focus should be on how to delay the spread of the disease.
“Meanwhile, the irrational behavior of consumers [hoarding of masks, panic buying], investors [sharp fall of stock markets all over the world], and some banks [unusually heavy cash withdrawal from BSP] is based on fear not fact,” he said.
“But what is needed at these trying times is evidence-based, clear thinking,” Diokno said.
He said for all supervised financial institutions, the Monetary Board approved the grant of temporary and rediscounting relief measures.
“No doubt, the COVID-19 has potential impact on the operations of BSFIs in terms of risks related to borrowers and/or businesses severely disrupted by the Coronavirus breakout as well as disruption in operation due to measures put in place to control the spread of virus,” he said.
“But there is no reason to believe that the COVID-19 crisis could severely cut the Philippine growth momentum. The truth is that the economic fundamentals are on our side. Even under the worst possible scenario, the Philippines can still grow this year and in the medium term by about 6 percent,” he said.
He said country had both ample fiscal and monetary space and its debt to GDP ratio was low and falling, while inflation rate was muted and within target range.
Diokno said the peso remained steady, supported by hefty gross international reserves. The country has a reliable and sustainable source of foreign exchange from overseas Filpino workers remittances, foreign direct investments, and receipts from business process outsourcing, he said.
He said the banking industry is sound and adequately capitalized.
“The economy is robust enough to withstand the COVID-19 public health crisis,” Diokno said.
Diokno said earlier the Monetary Board might consider having bigger interest rate cuts this year to contain the impact to economic growth of COVID-19. Diokno committed to a 50-basis-point cut in interest rates in 2020, but he said further cuts were possible.
The Bangko Sentral on Feb. 6 reduced the policy rate by 25 bps to 3.75 percent amid the benign inflation environment. Another 25 bps cut is expected in the succeeding meetings. The board is set to conduct its next policy meeting on March 19.
The government set a growth target of 6.5 percent to 7.5 percent this year, faster than the 5.9-percent expansion last year. The National Economic and Development Authority last week said it was expecting a slower growth of 5.5 percent to 6.5 percent growth this year, taking into account the huge impact of COVID-19 on the tourism industry, which is one of the pillars of the economy.
Meanwhile, the electronic money industry expressed its full support to the call of the Bangko Sentral ng Pilipinas to shift from cash to digital, where possible, in light of the COVID-19 pandemic.
“We support the BSP’s call to the public to increasingly use digital transactions, where possible, for social distancing and to avoid crowds in light of the COVID-19 pandemic. Digital financial services are already increasingly being used by Filipinos for remittance, person-to-person and bank transfers, bills payments, settlement of government taxes and social service contributions, online commerce, QR payments, and purchase of digital goods. The eMoney industry is fully committed to help mitigate the spread of COVID-19 through digital financial services,” said Orlando Vea, chairman of the Philippine eMoney Association and chief executive and founder of PayMaya Philippines.
PeMA member companies include PayMaya, GCash, GrabPay Philippines, Nationlink Network, and Omnipay. It was formed in 2017 as an association among BSP-licensed non-bank electronic money issuers to help promote the government’s drive towards digitalization of financial transactions and to accelerate financial inclusion among Filipinos especially at the grassroots.
