MANILA – Despite the bright prospects in the country’s economic growth story, Bangko Sentral ng Pilipinas (BSP) governor Benjamin Diokno noted some headwinds are blowing overseas.
The central bank chief noted in a speech during the 100th year anniversary of Rotary Club of Manila held in Makati City on Thursday, he was “cautiously optimistic about the current state of the Philippine economy” while the external environment poses some challenges. The central bank released his full speech on Friday.
“We recognize the uncertainty in the global economic environment, with the IMF (International Monetary Fund) further revising down its global growth prospects due to volatilities in commodity prices, uncertainty over advanced economies’ policy normalization, as well as ongoing trade tensions as a result of the US-China trade war,” Diokno said.
However, the central bank chief noted “the Philippine economy is sound, its prospects are bright” at this point.
To shield the economy from the impact of outside risks, he said “keeping our house in order” remains the first and best line of defense.
“We are improving economic openness through liberalization of trade and foreign direct investment, we are enhancing external competitiveness by strengthening domestic industries; we are diversifying products and markets to non-traditional growing economies; and we are sustaining domestic economic resilience by building adequate buffers,” he said.
“These are some of the policy actions and reforms that we can pursue or continue to pursue in order to ward off the potential negative effects of external shocks, especially from rising protectionist measures and heightened policy uncertainty,” he added.
Diokno said there was no direct imposition against the Philippines in terms of exposure to the products imposed with tit-for-tat tariff measures between the US and China.
“But the extent of impact would depend on the industries affected,” he said.
“For instance, the Philippines could possibly boost exports of food and agricultural products to the US, taking advantage of the tariffs imposed on Chinese goods of similar nature. The same goes for US agricultural goods imposed with steep tariffs by China,” he added.
The central bank chief said there is one positive impact that the US-China trade war could have on the Philippine electronics industry.
“That is if companies on either or both of the countries use the Philippines as an alternative manufacturing site. This scenario, however, would take time and the Philippines would have to compete with other potential relocation sites like Vietnam and Indonesia,” Diokno said.
“The potential upside may not come about for a few years as firms would need to complete the lengthy process of shifting production sites,” he noted.
The Philippines also recognizes the continued trade friction could negatively affect overall investment sentiment and heighten cautiousness and uncertainty in global growth prospects.
“This could take its toll on the country’s external sector. Nevertheless, given that the economy’s growth is mainly driven by domestic demand, the trade friction would have limited negative impact on Philippine exports,” Diokno said. (GMA News)
