Financial and monetary developments and Bangko Sentral ng Pilipinas’ coverage responses


Officers and members of AmCham Philippines and the Joint International Chambers of the Philippines, my fellow audio system, everybody who’re with us just about, good morning. Thanks for inviting me to ship a keynote tackle in your Tenth Anniversary Discussion board entitled “Arangkada Philippines: Pathways to a Higher Future.”  

Arangkada comes from the Spanish phrase arrancada which suggests speed up.  My speak will deal with financial and monetary developments and BSP coverage responses to make sure that the Philippine economic system will proceed to speed up in the direction of a greater future.    

After 5 quarters of financial contractions, the nation’s actual GDP grew by 12 % within the second quarter of 2021 adopted by a 7.1 % development within the third quarter. For the primary three quarters of 2021, the Philippines’ financial development averaged at 4.9 %, throughout the authorities’s goal of 4 to five % for the 12 months.  

In September 2021, nonetheless, the nation’s unemployment price elevated additional to eight.9 % from 8.1 % within the earlier month. This end result is no surprise, given the extension of strict lockdown measures throughout the month. What’s notable right here, nonetheless, is that a number of the jobs misplaced firstly of the pandemic have been progressively recovered, with the variety of staff employed in September exceeding that of pre-pandemic degree.

The re-imposition of stricter lockdown measures, significantly within the Nationwide Capital Area, contributed to decrease enterprise confidence within the third quarter survey, though companies are extra optimistic for the final quarter of the 12 months and within the subsequent 12 months. Then again, shopper sentiment continues to enhance because of expectations of availability of extra jobs, extra or greater revenue, and efficient authorities insurance policies and packages, significantly in addressing COVID-19-related considerations.

The nation’s year-on-year headline inflation decreased additional to 4.6 % in October 2021 from 4.8 % in September, bringing the year-to-date common inflation to 4.5 %. That is above the Authorities’s inflation goal of three.0 % ± 1.0 proportion level for 2021. Primarily based on newest information, we count on level inflation for November to vary from 3.3 to 4.1 %. 

The most recent CPI outturn is per the BSP projections that whereas inflation might stay elevated within the close to time period, it might begin to fall throughout the goal vary by the top of the 12 months. 

In the meantime, inflation expectations stay firmly aligned with the baseline projection path for 2022-2023. Outcomes of the BSP’s survey of personal sector economists for November 2021 confirmed an elevated imply inflation forecast of 4.4 % for 2021, 3.5 % for 2022 and three.2 % for 2023.

Liquidity within the monetary system stays ample, increasing by 8.2 % year-on-year in September 2021. This was sooner than the 6.9-percent development recorded in August on a month-on-month seasonally adjusted foundation, M3 rose by 1.3 %. 

Credit score exercise elevated 2.7 % in September 2021, sooner than the 1.3-percent enlargement in August. The continued development for the second month in excellent loans of common and industrial banks displays the modest restoration in banks’ total lending attitudes together with improved financial prospects. 

As of end-September 2021, gross non-performing mortgage ratio of the Philippine banking system (PBS) stood at 4.4 %, greater in comparison with 3.5 % a 12 months in the past. The uptick, nonetheless, was accompanied by loan-loss provisioning with a non-performing loans protection ratio of 84.4 %. 

The Philippine banking system stays well-capitalized. As of the second quarter of 2021, its capital adequacy ratio is at 17.2 %, effectively above the ten % minimal threshold set by the BSP and the 8 % set by the Financial institution for Worldwide Settlements.

On the exterior entrance. The sustained rebound in key economies has spurred exterior demand. The nation’s exports and imports of products elevated by 21.3 % and 31.6 %, respectively. Money remittances from abroad Filipinos grew by 5.6 % in January to September 2021, from a 1.4 % contraction in the identical interval in 2020. In the meantime, enterprise course of outsourcing companies within the first half of 2021 remained sturdy regardless of the disruption in enterprise actions around the globe. 

Internet international direct investments for the primary eight months of 2021 elevated because of optimistic international investor sentiment on the nation’s macroeconomic fundamentals and powerful development prospects. 

The nation’s excellent exterior debt additionally stays at a prudent degree as its ratio to GDP barely eased to 26.5 % in end-June 2021. Notably, a big portion of the nation’s exterior debt has medium- and long-term maturity profile and carry fastened rates of interest. These two components make the servicing of international debt much less vulnerable to volatilities in world rates of interest or international change fluctuations.

The gross worldwide reserves stood at US$108 billion as of October. That is equal to nearly 11 months’ value of imports of products and funds of companies and first revenue. The traditional knowledge is that 3 months’ value of imports is enough. The GIR degree can also be about 7.8 occasions the nation’s short-term exterior debt primarily based on authentic maturity, and 5.4 occasions primarily based on residual maturity. The gross worldwide reserves proceed to be augmented by bettering inflows of money remittances from abroad staff and receipts from enterprise course of outsourcing. 


The BSP acknowledges the essential function of micro, small, and medium enterprises within the Philippine economic system. Let me talk about the big selection of insurance policies and regulatory and aid measures that the BSP has deployed to assist MSMEs. 

– One is permitting the brand new peso-denominated loans to MSMEs and critically impacted giant enterprises that don’t belong to a conglomerate as eligible devices for compliance with the BSP’s reserve requirement. The usage of MSME loans as allowable various compliance with the reserve requirement shall be out there to banks and non-bank monetary establishments with quasi-banking features from 24 April 2020 to 29 December 2022, topic to early closure of the eligibility window by the Financial Board, if warranted and with prior discover. 

– For the week ending 31 October 2021, the banking system allotted a median of P202.2 billion loans for MSMEs as various compliance with the reserve necessities. This degree marks a considerable enhance from the P8.7 billion common MSME loans that have been reported for the week ending 30 April 2020. The most recent degree is equal to 13.6 % of the whole required reserves, from 0.6 % on 30 April 2020. 

– The Financial Board additionally authorized prudential measures to help MSMEs. The regulatory capital remedy of MSME exposures was amended to briefly scale back the chance weights of loans granted to MSMEs. The implementation of the revised risk-based capital framework for banks was additionally deferred from end-2021 to end-2022

– The interval of aid on the reporting of late and non-performing loans of debtors affected by the pandemic was additionally prolonged to 31 December 2021 from the unique timeline of 8 March 2021 topic to reporting to the BSP. 

– These coverage issuances reinforce earlier pronouncements of the BSP that chill out the Know-Your-Buyer necessities for retail purchasers to facilitate their entry to formal financing channels. 

Given a manageable inflation path, the BSP has saved the important thing coverage rate of interest at 2.0 % in its newest Financial Board assembly. The BSP’s coverage and liquidity-easing measures have injected into the monetary system a complete liquidity equal to round 13 % of the nation’s full 12 months nominal gross home product for 2020 as of November 11, 2021.

Transferring ahead, the BSP’s actions and coverage thrusts will proceed to be anchored on its core mandates of selling worth and monetary stability. In the direction of this finish, the BSP will proceed to pursue applicable coverage actions attentive to the wants of the time.

On financial coverage: the BSP will stay vigilant over the present inflation dynamics to make sure that the financial coverage stance continues to assist financial restoration to the extent that the inflation outlook would permit. It can rigorously scan the working atmosphere with a forward-looking perspective to maneuver in a pre-emptive vogue to deal with any dangers to our worth stability mandate.

On the monetary sector: the BSP will intensify its monitoring and surveillance over its supervised establishments to make sure that they continue to be resilient to rising dangers and proceed to be sound, secure, and inclusive, significantly via the pursuit of enhanced digitization.

Lastly, on the exterior sector: the BSP will stay supportive of insurance policies that can assist strengthen the economic system’s resilience to exterior shocks, together with that of sustaining a market-determined change price, retaining a snug degree of reserves, and retaining the nation’s exterior debt manageable.

Extra not too long ago, the nation has managed to efficiently scale back the variety of COVID-19 circumstances. As of the opposite day, the Philippines logged 425 new COVID-19 circumstances. That is the bottom since July 2020.

Contemplating the latest financial developments and vital enchancment in vaccine rollout, we’re optimistic that there’s enough assist for the nation’s restoration this 12 months and within the close to time period. The administration of dangers via the calibrated reimposition of lockdown restrictions, the anticipated revitalization of key industries because of authorities coverage assist and structural reforms, and an bettering world economic system ought to assist the Philippine economic system to get well in 2021 and speed up in 2022. 

Lastly, permit me to finish my presentation with these key factors:

· The nation’s macroeconomic fundamentals stay sound. 

· The most recent GDP development means that financial rebound is underway. Robust development is predicted in 2022. 

o The at the moment elevated inflation is because of transitory components. Inflation stays well-anchored.

o Banks stay sound and whereas non-performing loans has elevated, banks stay extremely capitalized.

o Exterior place is powerful, supported by greater than ample exterior liquidity buffer and bettering inflows from abroad Filipinos’ remittances and receipts from enterprise course of outsourcing. 

o Financial exercise is vastly bettering. But, the general momentum of the financial restoration stays foggy so long as an enormous a part of the inhabitants stays unvaccinated and there’s nonetheless a potential emergence of extra virulent variants. However, the sustained implementation of focused fiscal initiatives, in addition to the acceleration of the vaccination program, ought to assist increase market confidence and financial restoration.

The BSP is dedicated to an accommodative financial coverage stance supportive of infusing liquidity within the monetary system and restoration of the economic system. 

The BSP’s actions and coverage thrusts will proceed to be anchored on its core mandates of selling worth and monetary stability.  Thanks.​


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