Bangko Sentral ng Pilipinas Governor Benjamin Diokno said he is now seeing “concrete” signs of economic recovery from the global COVID-19 pandemic, driven by the faster pace of vaccination program that is boosting economic activity and employment.
Diokno, in a presentation Wednesday during the virtual BSP-Philippine Institute of Development Studies research forum, said growth had gained traction with the gross domestic product expanding 11.8 percent in the second quarter of 2021, after five quarters of pandemic-induced contractions that started in first quarter 2020.
“A year and a half since the onset of the COVID-19 pandemic, we are seeing concrete signs of economic rebound,” Diokno said.
“The accelerated vaccination rollouts, granular lockdowns, and the continued implementation of health safety protocols have allowed the Philippine economy to gradually reopen and for workers to regain their jobs,” he said.
He said the BSP was standing by the interagency Development Budget Coordination Committee’s revised forecast of 4-percent to 5-percent growth this year and 7 percent to 9 percent in 2022.
The economy contracted 9.6 percent in 2020 due to the pandemic, the worst economic performance since World War 2.
The BSP acted swiftly in 2020 to support the economy during the pandemic. It reduced its policy rate by a total of 200 basis points to help bring down the cost of borrowing and shore up market confidence. At the same time, it lowered reserve requirements by 200 basis points to increase the volume of loanable funds.
In addition, it allowed banks to count new loans to micro, small and medium enterprises and large enterprises as alternative compliance to the reserve requirement.
BSP also adopted extraordinary liquidity measures. These include purchases of government securities in the secondary market and provisional advances to the national government.
“In total, the BSP has infused about P2.23 trillion in liquidity, equivalent to 12.5 percent of the country’s GDP for 2020,” Diokno said.
The BSP implemented regulatory and operational relief measures to maintain the stability of the financial system and ensure smooth access to financial services. It issued time-bound and targeted regulatory and operational relief measures to encourage BSP-supervised financial institutions to continue their support to the economy, with particular emphasis on the MSME sector.
Earlier, multilateral agencies said the faster pace of vaccination program would be a key factor for the economy to recover quickly from the impact of the pandemic.
The International Monetary Fund said continued policy support, vaccine roll-out and global growth will support a stronger economic recovery in 2022.
Thomas Helbling, IMF mission chief for Indonesia and the Philippines, said the progress in the vaccination program and monetary and fiscal policy support would be central to the economic recovery in the near term. A stronger global economy will be another crucial element to the economic recovery.