The head of the country’s central bank said there must be a significant increase in consumer spending and bank lending if the Philippine economy was expected to recover from the beating it absorbed from the coronavirus disease 2019 crisis.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno shared his thoughts on ways to restart the economy during The Manila Times’ virtual forum on Monday.
“There is a lot of confidence in the Philippine economy, but we shouldn’t rest on that reputation. I think we can do much more than that, much better,” he said.
He underscored the importance of consumption in spurring growth.
“We want people to spend. We want consumers to spend,” Diokno said as he encouraged people to take advantage of the prevailing rock-bottom interest rates after the central bank further cut its key policy rates by another 50 basis points last week.
“If you are a businessman, if you have a bright idea, go to the bank and you can borrow at a very low cost at the moment. And it’s gonna be for a long time. This low interest rate will be around for a long time,” he said.
Diokno added that the BSP’s low interest rate regime should stimulate bank lending, which would in turn crank up economic activity.
“Banks are businesses. They are not a charitable institution. They have to weigh the risks, that is why we reduce the interest rate. We don’t want the banks to park their money with us. We want them to lend money,” he said.
He gave assurances that banks are still in good shape since they are well capitalized and possess high-quality loans and low non-performing loans.
They also have sufficient buffer before and even during the coronavirus crisis, he said.
Diokno also elaborated on BSP’s four critical structural reform imperatives designed to promote economic growth.
These reforms are the modernization of the health system, massive upgrading of the information and communications technology infrastructure system, modernization of agriculture and government’s supply chain management system, and the development of highly skilled and resilient workforce.
Diokno also assured that the BSP “has yet to exhaust the conventional monetary instruments in its toolkit to support the liquidity requirements of the economy, should conditions warrant.”
“Given the possibility of higher defaults and non-performing loans, there may be scope to offer more debt restructuring measures,” he said.
He stressed that the central bank agrees in principle with the goals of the proposed Philippine Economic Stimulus Act of 2020 that aims to ease the plight of workers, families and businesses that were hard hit by the pandemic.
The Manila Times Forum was co-presented by BDO Unibank Inc., Bank of the Philippine Islands, BPI Philam and San Miguel Corp., and sponsored by SM Investments Corp. Its special partners were the Cagayan Economic Zone Authority, Entrego, Maybank and Paymaya.