The Bangko Sentral ng Pilipinas (BSP) remains optimistic the country will hit its economic growth targets this year and next, brushing off an International Monetary Fund (IMF) downgrade.
BSP Governor Benjamin Diokno said in a Bloomberg TV interview that he is confident the country would hit its gross domestic product (GDP) growth forecasts of four to five percent this year and seven to nine percent next year.
After exiting the pandemic-induced recession with an 11.8 percent GDP growth in the second quarter, Diokno said GDP expanded anew in the third quarter.
“We’re confident that the third quarter will be positive,” he said.
In response to the decision of the IMF to lower anew the Philippines’ GDP growth forecasts to 3.2 percent instead of 5.4 percent for this year and 6.3 percent instead of seven percent for next year, Diokno said the BSP is still confident the revised targets would be achieved.
“I don’t see whether there’s a lot of weight that you can give to forecasts nowadays because things are really subject to a lot of uncertainty. But we’re very confident now with our revised forecast. Why? Because we have accelerated our vaccination program, which to me is the key to recovery,” the BSP chief said.
As of Oct. 11, the Philippines has received 87.69 million COVID vaccine doses. Data showed 21 percent or 23.18 million Filipinos are fully vaccinated, while 24 percent have received their first dose.
“In Metro Manila alone we have vaccinated 80 percent of adult population and we’re going to start vaccinating the young ones aged 12 to 17,” he said, adding the government has placed orders for about 107 million doses from various suppliers.
Diokno said the recent forecast of the IMF may be based on past numbers.
According to Diokno, the central bank would continue to keep an accommodative monetary policy stance to allow the recovery that remains fragile gain more traction.
Diokno said inflation is seen decelerating back to within the BSP’s two to four percent target toward the end of the year and average 4.4 percent this year, before easing to 3.3 percent next year and 3.2 percent in 2023.
The central bank’s Monetary Board has kept interest rates at record lows for seven straight rate setting meetings since November last year as it vowed to do whatever it can to help the economy fully recover from the pandemic-induced recession.
“It’s not that we don’t want to move the rate, we just feel that the current policy rate is appropriate for the current situation, while there is a strong recovery, I would say because the economy has recovered,” the BSP chief added.
He said exports grew by 21 percent and imports jumped by 31.4 percent, while foreign direct investments increased by 14.7 percent in the first half of the year.
“So there’s a lot of progress. But on the interest rate, we feel that the growth is still nascent, you have to take care that it is sustainable. So the Monetary Board has decided that the current policy rate is appropriate, given that inflation is manageable,” Diokno said.
For his part, ING Bank Manila senior economist Nicholas Mapa said the overall growth pace still lacks momentum to close out the year as partial lockdowns were reinstated across portions of both the third and fourth quarters.
“The IMF downward revision to GDP reflects the view that growth momentum has slowed considerably after the initial reopening of the economy last year. The Q2 GDP year-on-year growth was largely base effect driven while quarter-on-quarter GDP growth actually contracted,” Mapa said.
Despite improvements in mobility and vaccination levels, Mapa pointed out the Philippines does not resemble an economy on the mend just yet as the Dutch financial giant sees the GDP expanding by 3.7 percent this year.
“By and large, the economy remains in recession and it will take a much more convincing bounce back to exit from this prolonged downturn,” Mapa said.