By Fernando P. Gil
Despite all predictions of a Philippine economic recovery by yearend, such optimism, especially from state institutions, may have dimmed with the country’s recent inclusion in the Financial Action Task Force’s (FATF) “Gray List.”
At least one government agency, the National Economic Development Authority (NEDA), earlier this month, offered a more conservative recovery estimate, placing the timeline at about the second quarter of 2022. NEDA’s forecast is seen by economic observers as a more educated prediction, albeit still on the more optimistic side.
FATF, an international institution whose membership counts 200 jurisdictions worldwide, is tasked with monitoring movements of hot or illicit money.
Though the international financial watchdog’s statement was delivered diplomatically, the meaning and potential ramifications were not lost to local financial observers.
The Philippines’ inclusion in the Gray List will likely drive foreign investors’ money elsewhere. It is worth noting that the country has already been posting a steady decline in foreign investments in the last few years.
These developments, coupled with the peso’s softening in recent weeks, if unchecked, will definitely dash whatever hopes remain for an economic rebound before the end of 2021.
Local bank lending, which is another indicator, is said to have declined over the last six months. Banks’ aversion to lending more seems fueled primarily by the pandemic, which has battered employment levels in the Philippines.
From all indications, uncertainties regarding Asian food supplies, coupled with the current volatility in world crude prices, counts among the agglutination of elements bringing down the PH peso’s value.
What is clear from FATF’s statement is that it finds the volume of money laundering in local financial circles unacceptable. Laundered money often finds its way to funding international terrorism. This, apparently, proved to be the weightier consideration for putting the country in the infamous list.
The task force’s statement includes advice to intensify efforts to reduce corruption in both the Philippine government and the private sector. At this point, it is a herculean undertaking any way you look at it.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno stated that “adopting compliant laws and regulations is not sufficient, we have to demonstrate effectiveness.” Diokno is also the ex-officio chair of the PH Anti-Money Laundering Council.
Though the Berlin-based Transparency International’s Corruption Perception Index shows that corruption in the PH has remained unchanged since 2019, it nevertheless stands today at one notch lower than its 2016 level, when the Duterte administration took over the reins of government.
All these factors further lower the chance of an economic recovery by yearend.
The author is a former business journalist and a keen economic observer.