Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Thursday the economy showed tentative signs of recovery, although the outlook remains uncertain with the lingering impact of the COVID-19 pandemic.
Diokno, in an online briefing, cited the movement of people and the rising purchasing manager’s index in manufacturing as among the signs of rebound.
“Recent indicators of activity suggest that the economy has turned a corner,” he said, adding the “rising trend of the mobility and purchasing manager’s indices suggests that economic activity continues to gradually rise closer to pre-pandemic levels after the steep decline in 2020.”
“The path to recovery, however, remains uncertain amid the spread of the more transmissible variants of COVID-19. The Monetary Board has observed that the re-imposition of lockdown measures in March-April and now in August could ultimately dampen overall growth in 2021,” he said.
Diokno said the BSP continued to have ample monetary policy space and the current accommodative policy settings represented appropriate stimulus to demand.
He said the accommodative policy settings should be allowed to continue to work their way through the economy to bolster private consumption and investment.
“The BSP’s monetary policy remains oriented towards supporting ongoing economic recovery amid supply-side pressures and the presence of economic slack as well as the downside risks to domestic demand from the impact of the protracted COVID-19 pandemic,” he said.
He said heightened risk aversion amid risks to corporate and household balance sheets continued to dampen lending activity.
Diokno said while business and consumer sentiment gradually improved, domestic demand continued to be tempered by the uncertainty surrounding the pandemic, especially amid the emergence of the Delta variant and the progress of the vaccination rollout in the country.
He said fiscal support remained critical to sustaining economic momentum and preventing long-term scarring.
“Continued implementation of targeted fiscal initiatives coupled with efforts to ramp up the vaccination program should help boost market confidence and drive the economic rebound, especially after the restrictions are lifted,” he said. Julito G. Rada
He said while the BSP continued to prioritize the use of monetary policy space to provide support to economic activity amid the pandemic, it also remained vigilant and was ready to respond against emerging risks to price and financial stability.
Economic managers earlier lowered the 2021 GDP growth forecast to a range of 4 percent to 5 percent from the previous estimate of 6 percent to 7 percent.
The growth targets were retained at 7 percent to 9 percent for 2022 and and 6 percent to 7 percent for 2023 and 2024.
Diokno said when domestic developments warranted a recalibration or withdrawal of policy support, the BSP would properly establish a smooth normalization of time- and state-bound measures.
The BSP cut the policy rate by a total of 200 basis points last year to a record-low of 2 percent and reduced the reserve requirement by 200 basis points to 12 percent to support the economy.