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GMANews.TV
04/23/2009 | 05:43 PM
MANILA, Philippines The Bangko Sentral ng Pilipinas downplayed International Monetary Fund (IMF) forecast that there will be no economic growth for the Philippines this year with the global economy declining for the first time since World War II.
In a statement, BSP Governor Amando M. Tetangco, Jr. said the country’s export industry, remittances and outsourcing sectors "retain important elements that render them less vulnerable to the world-wide economic down cycle" even if they are exposed to more difficult global conditions.
"While the Philippines is not immune to the global economic slowdown, a flat growth, as announced by the IMF, is unlikely. There are fundamental forces in the economy that would help it to withstand global shocks and avoid a major slippage in growth," he said.
He cited monetary policy has been "appropriately stimulative" to support demand and minimize the "corrosive feedback loop stemming from weaker economic and financial conditions."
"Furthermore, there is room to ease monetary policy settings should conditions warrant given the benign inflation outlook and well-cemented inflation expectations. Recent adjustments in fiscal spending plans should also provide needed boost to growth," he said.
The Monetary Board has cut rates by 150 basis points since December.
In its monthly meeting last week, the Monetary Board decided to reduce key policy interest rates by another 25 basis points to 4.5 percent for the overnight borrowing or reverse repurchase (RRP) facility and 6.5 percent for the overnight lending or repurchase (RP) facility. The current RRP rate is the lowest since 15 May 1992.
Tetangco said the banking system is "fundamentally strong and properly discharging its role to intermediate funds and manage risks" as a result of reforms such as clean up of bad assets, capitalization build-up and enhanced risk management.
"The Philippine economy is also better able to ride out the current crisis due in part to lessons learned from past crises: it is therefore better prepared this time around as evident in the rise in foreign exchange reserves, sturdier external payments dynamics, lower public debt burden and improved supervision of the banking system as well as enhanced disclosure and information practices," he said.
The BSP chief said IMF has "tended to be overly pessimistic" in projecting Philippine economic growth.
"In the past seven years, the IMF has consistently underestimated Philippine GDP growth forecast by an average of about half a percentage point," the statement read.
The BSP believed there are more skilled and professional workers deployed at nine million than those displaced as reported by the Department of Labor and Employment (DOLE).
"The strength of overseas’ Filipinos remittances are supported by key fundamentals. Deployment has also continued to grow in 2009, and there has been a gradual increase in the share of workers with permanent resident status, suggesting a welcome shift from yearly contract renewals to more long-term employment," he said.
The Philippine Overseas Employment Administration has also indicated that labor demand could remain strong in some countries given the needs in their power or energy and tourism industries.
"The hiring program for nurses and caregivers in Japan under the Japan-Philippines Economic Partnership Agreement, which is expected to commence soon, could open up opportunities for Filipinos in the field of health and medical care. The DOLE has also been fielding labor teams in crisis-affected host countries to help displaced Filipino workers find other work opportunities," he said.
As global recession deepens, companies from developed economies will see the future in outsourcing to cut costs.
"The continued shift to high-value services alongside the increasing need to outsource non-core business activities in firms in the advanced economies are expected to propel the growth of the Philippine BPO (business process outsourcing) industry in 2009," Tetangco said.
"Recessionary conditions in the global economy are expected to encourage firms to outsource, as they seek to streamline costs further. The growing success of firms that have adopted outsourcing could drive higher acceptance of such a business model," he added. -GMANews.TV
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