A pleasant good afternoon Atty. Duran and the members of the Tax Management Association of the Philippines.
Thank you for the opportunity to share the BSP’s programs aimed at stimulating business activity and help businesses recover from the COVID-19 crisis.
We recognize that this engagement is critical because it serves as a platform to discuss the mutually reinforcing role of monetary, prudential, and fiscal policy in the achievement of our shared goal sustainable and inclusive growth.
Thus, it is my hope that this brief keynote will set the tone for discussions on the design of TMAP’s plans of action in the coming months.
My presentation for this afternoon will be organized as follows:
First, I will provide an overview of our current economic and financial landscape. Next, I will briefly describe the BSP’s COVID-19 crisis response plan.
This will be followed by a discussion on some of the BSP’s key structural reform initiatives.
Finally, I will conclude with some thoughts on areas of policy convergence which would be useful for the task moving forward.
According to the IMF, all countries are facing a “Long Ascent” that is “long, uneven, uncertain and prone to setbacks.”
The IMF projects that the global economy will contract by –4.4 percent this year before bouncing back in 2021 and 2022. The Philippines has not been spared.
The Philippines’ GDP fell by 9.0 percent in the first half of 2020 after 21 years of uninterrupted growth. But we expect the economy to bounce back next year. In fact, there are early signs of recovery.
Manufacturing indices have registered an uptick. The PMI improved from a low of 27.1 in March to 50.1 in September. The value and volume of production for the manufacturing sector are also showing signs of improvement.
Year-to-date inflation of 2.5 percent remains manageable and within the target range of 2.0 to 4.0 percent for 2020.
The government has maintained its fiscal prudence with a debt-to-GDP ratio below 50 percent.
Foreign direct investments grew to USD3.8 billion as of end-July 2020.
Imports made some headway, with the year-on-year contraction slowing down from 65.3 percent in April to 22.6 percent in August.
Similarly, the year-on-year decline in exports eased to 18.6 percent in August from 49.9 percent in April.
As of end-August, the gross international reserves stood at a hefty USD100.5 billion, the highest ever in Philippine history.
Overseas Filipino remittances rebounded, settling at USD19.3 billion as of end-August 2020, much better than originally forecasted.The Philippine also banking system entered the crisis with strong fundamentals and sound risk governance.
During the first eight months of 2020, banks managed to report sustained growth in assets, loans and deposits.
Total bank assets stood at P18.6 trillion as of end August funded by sustained growth in deposits.
The total loan portfolio of banks stood at P10.7 trillion, with a growth rate of 4.4 percent (YoY) in August. The quality of the loan portfolio remained satisfactory at 2.8 percent as of end-August 2020.
Meanwhile, banks remain profitable posting P85.8 billion in net income as of end-June 2020.
Bank capital and liquidity buffers also continue to be sufficient.
Banks remained well-capitalized with capital adequacy ratio of 15.3 percent on solo basis as of end-March 2020.
The bank’s capital was also made up of the highest quality of capital, with a Common Equity Tier 1 ratio of 14.7 percent.
Banks’ liquidity coverage ratio of 171.4 percent remained stable and above the regulatory minimum of 100 percent as of end-March 2020.
Meanwhile, the net stable funding ratio of 129.1 percent indicates availability of stable funding to support bank operations.
The BSP’s roadmap to recovery consists of a suite of policies which fall under two categories based on their intended objective.
At the height of the lockdown period, the BSP moved to cushion the immediate impact of the COVID-19 on households, businesses, and financial institutions by activating its short-term crisis response plan.
The second phase of our roadmap includes interventions meant to support recovery.
The BSP’s short-term crisis response plan is a long list of regulatory relief measures which were adopted to assist financial institutions carry on with their operations and provide financial services to their clients.
In particular, the time-bound actions undertaken by…