Mr. Miguel Angelo Villa-Real, current President of the Bank Marketing Association of the Philippines (BMAP), directors and officers of the BMAP, distinguished colleagues from the banking industry, fellow speakers, guests, ladies and gentlemen, good morning to all of you!
My presentation is divided into three parts.
First, I will discuss Philippine macroeconomic updates.
Second, I will talk about how the country’s banking sector is faring.
And third, I will share insights on where we see the domestic economy is headed post pandemic.
First, on macroeconomic updates.
At this point, I can report that the worst is over. While we’re not out of the woods yet, there has been progress as the economy gradually opens up from the strict lockdown in March to June to less stringent quarantine measures.
We’re learning to live with the virus. Now, we’re at an inflection point.
For instance: The Purchasing Managers’ Index (PMI) moved past the growth threshold of 50, settling at 50.1 in September.
Foreign direct investment (FDI) net inflows likewise sustained its uptrend in July 2020 (latest data), registering an increase of 35.2 percent year-on-year to US$797 million.
The unemployment rate improved from a record high of 17.7 percent in April-which was the height of the lockdown-to 10 percent in July.
Contraction of imports slowed down from 65.3 percent in April to 22.6 percent in August. And, the decline in exports eased from 49.9 percent in April to 18.6 percent over the same period.
Major indicators suggest that financial markets are responding well to our policy responses. Yesterday, the PSEI reached 6,941.19.
The strength of the Philippine Peso remains market-driven and supported by sound macroeconomic fundamentals.
The peso opened at P48.40/US$1 today. The peso is the strongest currency in Asia.
The peso’s strength was supported by positive market view given the country’s strong macroeconomic fundamentals, which include the manageable inflation environment, a strong and resilient banking system, prudent fiscal position, and a high level of international reserve buffer.
With all these developments as backdrop, we expect an even firmer economic recovery next year.
Based on official government projections, GDP will swing from a contraction of 7-9 percent this year to a growth of 6.5 to 7.5 percent next year.
The IMF’s latest GDP forecast for the Philippines for next year-at 7.4 percent-is close to the high end of the government’s projection.
Inflation is manageable at 2.5 percent in the first nine months of the year. It is seen to settle between 1.75–3.75 this year, and 2.0 to 4.0 percent next year and in 2022.
Favorable inflation gives room for the BSP to further ease monetary policy, in case needed.
Exports and imports will rebound from negative territory this year to 5.0-percent and 8-percent growth, respectively, next year.
FDIs will rise to USD 7.0 billion next year.
Overseas Filipino remittances will rebound from a contraction of 2 percent this year-an improvement from our previous forecast of 5 percent contraction-to a growth of 4 percent next year.
Year-to-date, remittances dropped by only 2.6 percent as of August. Our overall external position will stay healthy.
The balance of payments will post a surplus of USD 8.1 billion this year and USD 3.4 billion next year.
The current account will also remain in surplus, at USD 6.0 billion this year and USD 3.1 billion next year.
Meanwhile, the gross international reserves will continue to hit new highs of USD 100 billion this year and USD 102 billion next year.
Our recovery prospects are supported by a whole-of-government approach to addressing the crisis.
The National Government has rolled out massive relief and mitigating measures, and boosted the country’s healthcare capacity.
Congress immediately passed critical bills to support the government’s COVID response.
For our part, the Bangko Sentral ng Pilipinas (BSP) has been quick and decisive in responding to the crisis.
Our actions were meant to, first, boost market confidence and cushion economic activity; second, provide liquidity to complement government programs; third, sustain financial stability; and fourth, support continuous delivery of financial services.
In total, the BSP has already injected P1.9 trillion (about USD 39.2 billion)-equivalent to 9.6 percent of GDP-into the financial system.
Besides cuts in the policy rate and the reserve requirement, we have…