MANILA - Bangko Sentral ng Pilipinas is ready to unwind its support for the country’s pandemic-battered economy when the conditions are right, the central bank said on Thursday, as it also warned that the recent spike in COVID-19 infections poses a risk to economic growth.

Diokno said in a forum on Thursday that the central bank is eyeing to slowly remove the monetary policy interventions introduced during the pandemic-induced economic downturn.

But he added that while recent indicators point to a recovery in economic activity, the recent uptick in new COVID-19 cases represents a downside risk to the outlook for growth and inflation.

• PH logs 17220 new COVID cases, 36.9pct positivity rate

"The timing and conditions under which the BSP will start unwinding its pandemic induced interventions will continue to be guided by inflation and growth outlook over the medium term and the risk surrounding such outlook," Diokno said.

The central bank chief said this is why the central bank is choosing to be patient with its next moves.

“Therefore we deemed it prudent to leave some room for flexibility in policy making to account for uncertainty and risk especially as the situation remains very fluid."

The BSP has kept the country's benchmark interest rate at a record-low 2 percent since November 2020 and reduced the reserve requirement ratio for banks to add liquidity to the market.

Analysts expect the BSP to start tightening monetary policy this year as the economy gradually improves. FItch Solutions is expecting a staggered 75-basis point rate hike in 2022.

• BSP seen hiking rates by 75 bps in 2022

Diokno meanwhile said the exit from pandemic measures has no timeline yet.

"The exit strategy is not calendar-based, but outcome-based. It will depend on the evolution of various domestic factors including liquidity and credit dynamics, financial sector risk and the state of public health, as well as evolving global developments and potential spillovers," he added.

Diokno said they would rely on data on how best to help the economy.

One good sign of economic recovery is the lower request for provisional advances by the national government.

The approved P300 billion provisional advances in December was much lower than the P540 billion request in June 2020, which has since been fully paid, Diokno said.

The challenge in the coming months is maintaining the balance between supporting the economy's momentum and preventing the build-up of risk to inflation, he added.

A premature exit could take away the needed stimulus for economic recovery while waiting too long could "ferment inflationary pressures" in an environment of prolonged low interest rates, the BSP chief said.

Several central banks have already raised interest rates or signaled a shift in monetary policies to address rising inflation.

The BSP expects inflation, which eased to 3.6 percent in December, to settle within the government target of 2 to 4 percent in 2022 and 2023.

• Inflation eases to 3.6 percent in December 2021

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