Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno considers as temporary the economic weakness in the Philippines caused by the coronavirus disease 2019 (Covid-19) pandemic.
In a Viber message to journalists Monday, Diokno said the 16.5-percent contraction of domestic output in the second quarter this year, which is larger than the 0.7 percent in the first quarter, “does not mean that the Philippine economy is structurally weak.”
“The contraction is temporary. The economy is robust, characterized by strong fundamentals: falling interest rates, appreciating peso making it the most appreciated currency in Asia; sound external sector with gross international reserves as high as USD94 billion; low debt-to-GDP ratio which is the envy of many emerging economies; and robust banking industry with good capital adequacy ratio and low net performing loans ratio,” he said.
Diokno said comparing the negative output of the economy in the second quarter of this year to second quarter prints during the pre-Edsa crisis in 1984-1985, the Asian financial crisis in 1997-1998, and the global financial crunch in 2007-2008 is “inappropriate.”
In the past crisis, he said the peso weakened, interest rates increased, the proportion of debt-to- domestic output increased, the country’s foreign reserves declined, and the banking sector faltered.
“In sum, there were inherent weaknesses in the economy then,” he said, citing also the country was even included as part of those called heavily indebted countries (HICs).
Diokno, however, said that in the ongoing pandemic, the growth contraction was caused partly by the enhanced community quarantine (ECQ),
Implemented from the middle of March until end of April for mainland Luzon, and extended until end-May for the National Capital Region (NCR) to limit the spread of the virus, to save lives and to improve capacities of health facilities and testing facilities.
He said growth contracted in the second quarter of this year because of the impact of the movement restrictions and “not because the economy was weak.”
“The setback is temporary. Recovery can come quickly once consumer confidence returns, factories fired up, construction activity particularly the BBB (Build, Build, Build) program is ramped up, and transportation is fully restored,” he added.
Diokno said “the immediate cause for the economic plunge in Q2 (second quarter), that is, the strict, nationwide lockdown is a thing of the past.”
“In the near future, while waiting for the vaccine, policymakers will opt for targeted, localized, village-level lockdowns. Hence, the adverse economic impact on jobs, incomes, and livelihoods will be subdued,” he added. (PNA)
