The Bangko Sentral
ng Pilipinas, much like Malaya, will be celebrating a hallmark anniversary this
year – its 25th year – from its inception on 3 July 1993. A lot can happen
in a score and 5 years’ time, one event is the United States (US) financial
crisis which stemmed from its sub-prime mortgage crisis in 2007 which then
unfolded to a global economic slowdown.
challenges, the BSP has remained steadfast in its commitment of price and financial
stability and the operation of an efficient and reliable payments system
consistent with sustaining the Philippines’ solid macroeconomic track record
while keeping ample policy space to help achieve growth objectives of the country.
Looking Back: The Economic and Financial Landscape in
In 2017, global
economic growth gained traction brought on by notable rebounds in trade, investment,
and industrial production, and further supported by improved business and
consumer confidence. The uptick in economic growth prompted major central
banks, especially in advanced economies, to gradually shift from accommodative to
more neutral monetary policy stance. For instance, buoyed by strong labor
market conditions and increased domestic spending, the US Federal Reserve raised
its target federal funds rate by 25 basis points to 1.5 percent last December
recovery in advanced economies also brought in front the prospect of higher
interest rates overseas which resulted in capital outflows from emerging
markets as investors searched for yields. In particular, the Philippines
registered net outflows in portfolio investments as well as depreciation of the
peso and deficit in the balance of payments account.
All the same, the
Philippine economy continues to be underpinned by strong fundamentals. The
Philippine economy has experienced sustained and uninterrupted expansion for
the past 75 quarters, with the first three quarters of 2017 registering growth
of 6.7 percent, within the government’s growth target of 6.5 – 7.5 percent for
the year. This expansion is backed by robust production, domestic demand, and
positive exports growth. Moreover, inflation remained low and stable for 2017.
Headline inflation slightly rose to 3.2 percent due largely to rising
international crude oil prices but remained well-within the official target range
of 2.0 – 4.0 percent. The latest forecast show that inflation is expected to
settle near the mid-point of the target range in 2018. At present, the BSP
deems its policy stance of low interest rates appropriate.
At the same time,
the Philippines’ stable and robust financial system continues to support