MANILA – Bangko Sentral ng Pilipinas’ (BSP) Governor Benjamin Diokno said on Wednesday talks about exit strategy for the central bank’s accommodative stance remain “too early” at this time as these depend primarily on domestic growth and inflation.
“We share the view that 2021, or this year, will be a recovery year and that the economy won’t be back to its 2019 level in the aggregate until perhaps the second half of 2022,” he said in a virtual briefing.
Diokno said having a comprehensive assessment on the effects of the pandemic “enables the BSP to have a clear guide to future actions when the economy fully recovers and growth becomes sustainable.”
In 2020, BSP slashed its key policy rates by a total of 200 basis points to help address the impact of the pandemic on the domestic economy.
To date, the BSP’s overnight reverse repurchase (RRP) rate is at a record-low of 2 percent.
Also, domestic growth, as measured by gross domestic product (GDP), registered a -9.5 percent print last year, within the government’s target, given the impact of the pandemic.
The rate of price increases has been rising since the last quarter of 2020, and has exceeded the government’s 2-4 percent target band since last January.
Last February, inflation rose further to 4.7 percent from 4.2 percent in the previous month.
To date, average inflation stood at 4.5 percent.
Diokno said that even with the uptrend in inflation rate, average rates for this and next year are expected to stay within the government’s target.
“At present, amid a manageable inflation outlook, subdued demand pressures, and within-target inflation expectations, the BSP has scope to preserve monetary policy in support to the economy to help strengthen overall demand and ensure market confidence,” he said, citing the importance of achieving the central bank’s price stability objectives.
Diokno said the recent jumps of coronavirus disease 2019 (Covid-19) infections to record-high may impact on consumer spending and business confidence but “can be directly addressed by ramped up public health measures.”
“The sustained recovery of the economy, as well as the prevention of permanent scarring effects, require that the heavy lifting should come primarily from fiscal and health authorities,” he added. (PNA)