MANILA, Philippines - Amid the challenging global financial climate, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. believes the Philippines is in a "position of strength."
The country’s top central banker mentioned this in a recent interview with Emerging Markets magazine, which awarded him the distinction of being the central bank governor of the year for the Asian region.
“The central bank, under Governor Amando Tetangco’s stewardship, has managed monetary policy with considerable skill, not least given the twin threats of China slowdown and spillover from the euro zone crisis,” said Taimur Ahmad, editor-in-chief of Emerging Markets, in a statement.
Tetangco, who received the award on the sidelines of the World Bank-International Monetary Fund meetings in Japan two weeks ago, boasted of the country’s strong macroeconomic fundamentals that allowed it to grow 6.1 percent in the first semester.
“I think, over-all, we are in a position of strength at this point in time. Our interest rates are still significantly positive. The BSP borrowing rate is at 3.75 percent, so there is room there. The government has a fiscal deficit that is substantially below the projection for the year, so they also have room to accelerate spending,” the BSP chief explained.
BSP’s policy-making Monetary Board has slashed policy rates by an aggregate of 75 basis points this year as inflation, which averaged 3.2 percent as of the third quarter, remained manageable and growth continued to be strong.
It is scheduled to meet again this Thursday and the market is expecting it to cut key rates again by another 25 basis points in a bid to tame the peso’s appreciation and support export growth. That would put interest rates at new record-lows of 3.5 percent and 5.5 percent for overnight borrowing and lending, respectively.
Latest data showed merchandise exports dropped nine percent in August. A strong peso, while making imports cheaper, also trims the value of dollar export earnings and remittances when they are converted into local money.
While easier monetary policy has helped boost growth, it has also sparked concerns of asset bubble formation or a situation when value of assets, given huge demand, tends to rise beyond real market prices.