MANILA -- Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Monday downgraded macroeconomic assumptions would hold as long as the Philippines escapes a second or third wave of infections.
The Philippines on Saturday started easing a 2-month-long lockdown in Metro Manila and other urban areas after economic managers revised its expectation this year to an economic contraction of 2 to 3.4 percent.
"A lot of things depend on the behavior of the people. If we can avoid a second or third wave, the forecast should be steady. In case there is a second wave, it will be much worse than the revised forecast," Diokno told ANC.
Diokno repeated his call for a supplemental budget, adding, "There's not enough room there for higher spending in this pandemic."
Should a second wave happen, the recovery could come as late as 2023 or later, said BPI lead economist Jun Neri. Second quarter GDP could contract by 12 percent, depending on government stimulus, he said.
The economy shrank by 0.2 percent in the first quarter, the first contraction in 22 years. The second quarter is expected to turn in worse numbers as the full effect of the lockdown is reflected.
The Philippines' confirmed COVID-19 cases topped the 12,000-mark with 817 deaths as of May 16. It expects up to P2 trillion in economic damage due to the virus.
Philippine banks are in a "position of strength" to ride out the pandemic, Diokno said.
The non-performing loan ratio is currently "in the neighborhood" of 2 percent and could go up to 5 percent based on stress tests, he said.
"We are closely monitoring the banking industry. We are going down to individual banks, granular data," he said. "The banking industry is sound, the banking industry as a whole is okay."
"We have prepared them well. We have asked them to create a lot of buffers. I think we can get through with minimal problems," he said.
Recalling reforms from the 1997 Asian financial crisis, Diokno said, "We are ready for this kind of crisis, that's what we prepared them for."