Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Wednesday the country is bouncing back from the devastating impact of the COVID-19 pandemic, but there should be continued vigilance amid the uneven pace of recovery across sectors.
Diokno said in an online briefing that a year into the pandemic-induced recession, the gross domestic product was expected to return to positive growth rates within the year.
“We are definitely better off today than a year ago. However, the ongoing recovery from old risks can generate a new set of potential risks. We need to continuously track these potential systemic risks, and act when warranted” Diokno said during the release of the Financial Stability Report for the first semester of 2021 by the Financial Stability Coordination Council which he chairs.
“Many aspects of the future remain uncertain and with uncertainty, risk aversion in financial markets may not be too far behind,” he said.
Finance Secretary Carlos Dominguez III, who sits as a member of the FSCC executive committee, said there should be regular systemic risk assessments to enable the government to quickly spot the underlying vulnerabilities of, and anticipate potential threats to, the financial system from the pandemic.
Dominguez said conducting these systemic risk assessments would protect both the economy and the Filipino people from “avoidable shocks” that could set back the country’s progress towards a strong post-pandemic recovery.
“Having a better understanding and view of brewing risks is necessary for calibrated actions and policy interventions. This is the way modern governments should operate. We should anticipate threats rather than merely react to problems after they have broken out,” Dominguez said.
Diokno said there were clear signs of stability, but market conditions remained very fluid.
“Vigilance is required as we protect our gains while mindful of further vulnerabilities. Systemic-risk management has always been a whole-of-market agenda,” Diokno said.
Dominguez assured the public that the Finance Department would continue to exercise judicious financial management to maintain the country’s fiscal stamina and ensure the resilience of the economy.
“Rest assured, we are doing our utmost to safeguard the health of our financial system to enable it to continue serving the needs of the public and support our ongoing recovery efforts. We will always be vigilant against the risks posed by the pandemic while taking advantage of opportunities that will help restore our country’s economic growth trajectory,” Dominguez said.
President Rodrigo Duterte recently institutionalized the FSCC through Executive Order No. 144 to further ensure the stability of financial system. EO 144 created the interagency FSCC, with the Bangko Sentral ng Pilipinas, Department of Finance, Securities and Exchange Commission, Insurance Commission, and the Philippine Deposit Insurance Corp. as its member-agencies.
The first chapter of the report takes a quick look at the effects of COVID-19 with a full year’s worth of data in place. It reiterates that debt servicing remains the main risk, a point that the FSCC already disclosed in its earlier statement on the state of financial stability. It adds that recovery from the recession is happening differently in one jurisdiction versus another. The FSR describes this a “divergence” and smaller economies like the Philippines face added risks through movements in financial prices in the international market.
Chapter 2 discusses the changed market conditions in the education, retail trade, and commercial real estate sectors.
The last section of the Financial Stability Report looks at how the FSCC will carry out its agenda moving forward. Aside from its surveillance framework and the tests that it intends to conduct, chapter 3 outlines the communication strategy of the FSCC.
It enumerates five foundational messages which it describes as building blocks and identifies its stakeholders that cover market players, analysts, the academe, media, and the public, as well as other government authorities.
The economy contracted by 9.6 percent in 2020 the pandemic, the worst since World War 2. This year, economic managers expect GDP to bounce back by 6 percent to 7 percent, anchored on the rollout of the COVID-19 vaccination that could spur consumer and business confidence.