FINEX President Atty. Francisco Ed. Lim, members and officers of FINEX, colleagues in the financial services industry and the Government, esteemed guests, ladies and gentlemen, a pleasant good afternoon to all.
I wish to thank FINEX, our reliable partner in financial deepening and capital market development, for inviting me to be a part of your 53rd Anniversary celebration.
Before I share with you the BSP’s initiatives towards economic and financial recovery in the New Economy, allow me to wish you all a Healthy and Prosperous New Year, as well as, to congratulate both the outgoing and incoming officers of FINEX for leading the organization in these trying times.
We now find ourselves in what I call the “crossing the threshold” moment. In the world of myths and movies, “crossing the threshold” occurs when the Hero leaves his or her ordinary world and enters a new, dangerous world. Your theme – Transcending New Frontier, Leading Beyond Recovery – speaks volumes of this “crossing the threshold” stage in the Hero’s journey arch.
In the real world, we acknowledge that the COVID-19 pandemic continues to pose threats to economies and financial systems around the world, including the Philippines.
The Philippine economy contracted by an average of 10.0 percent in the first three quarters of 2020, following 21 years of uninterrupted growth. However, said economic contraction was not reflective of the country’s strong fundamentals or prospects moving forward.
The BSP expects the recovery process to commence sooner as more industries re-open following the gradual easing of restrictions throughout the country combined with stimulus measures rolled out by the government.
On growth, we expect real gross domestic product to swing from a range of negative 7.0 to negative 9.0 percent for the full-year 2020, to a range of positive 6.5 to 7.5 percent this year and an even faster growth in 2022.
We anticipate interest rates to remain low, inflation to be manageable, the peso to be stable, and external accounts to be robust, with record-high gross international reserves.
We expect inflation to remain manageable and within the 2.0 to 4.0 percent target range this year and in 2022.
The strength of the Philippine Peso remains market-driven and supported by sound macroeconomic fundamentals.
The peso averaged P48.02/USD1 as of 4 January 2021, considered as one of the strongest currencies in the region. This is attributable to the country’s low inflation, a strong and resilient banking system, low debt-to-GDP ratio, and a hefty gross international reserve.
Overseas Filipino remittances are expected to rebound from a contraction of 1.0 percent in 2020 to a growth of 4.0 percent this year.
On the external front, the overall external position will stay healthy. The balance of payments will post a surplus of USD3.4 billion this year. The current account will remain in surplus, at USD3.1 billion this year.
Meanwhile, the country’s gross international reserves reached USD104.5 billion as of end-November 2020. At this level, the GIR remain more than adequate as it can cover 11 months’ worth of imports of goods and payments of services and primary income. This is more than the three months’ worth of imports cover requirement.
While the full impact of the pandemic is still unfolding, the good news is that the Philippine banking system is expected to withstand the impact of the pandemic. The financial system is in a strong position to both weather the significant economic effect caused by the COVID-19 pandemic and support the country’s economic recovery.
The domestic banking system is expected to remain relatively stable in the next two years. Majority of the Banking Sector Outlook Survey respondents projected that real gross domestic product growth will return to a range of less than 6.0 percent to 6.3 percent.
Likewise, 69 percent of the respondent banks projected a stable Philippine banking system.
Further, majority of the respondent banks projected growth between 10.0 percent and 15.0 percent in their loan portfolio over the next two years.
Banks also anticipate a more active participation in the money and capital markets in the next two years as growth in financial assets (excluding loans) is projected to not exceed 10.0 percent by more than half of respondents.
The remaining banks estimated a double-digit growth. A double-digit deposit growth is also expected by most banks.
Majority of the respondents…
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