Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said Wednesday the strong economic growth will continue in the coming years, supported by solid macroeconomic fundamentals.
“Is growth sustainable? My answer is yes…. our economy will continue to grow,” Tetangco said during the 10th ING Financial Executives Institute of the Philippines CFO of the Year Award at Makati Shangri-La Hotel in Makati City.
“Moving forward, we have sufficient buffers. The strength of the Philippine economy was driven by more than two decades of reforms,” Tetangco said.
He said the strength of the economy was not only driven by the sound and strong banking system, as “the condition of the whole can be the sum of respective parts.”
He said the government should continue to address risks threatening the economy and find ways to make institutions healthy and sound.
He said the 7.1-percent gross domestic product growth in the third quarter this year was the 71st quarter of uninterrupted economic growth that began a few years ago. The 7.1-percent GDP growth was the fastest in the Asian region in the third quarter.
Tetangco said latest economic data suggested that the country was poised for further growth in the coming years. He said inflation rate in the first 10 months averaged 1.6 percent, below the target range of 2 percent to 4 percent for the year.
Meanwhile, Tetangco said the depreciation of the peso to an eight-year low of 49.86 against the US dollar on Wednesday was a result of global financial volatility and the general strength of the dollar.
“Because the expectation was that interest rates are going to rise in the US as the new administration pushes for spending for higher economic growth which may trigger higher inflation and therefore higher rates,” Tetangco said.
“So we see the flow of capital out of emerging markets and back to the US. So if you look at movements of Asian currencies, the peso is basically in the middle of the range…,” Tetangco said.
He said Bangko Sentral was sticking to its current foreign exchange policy of allowing market forces to drive exchange rates while ensuring that the exchange rate would not be out of line.
“So most of these are externally induced. If you look at our macroeconomic fundamentals, we grew by 7.1 percent in the third quarter, inflation average is 1.6 percent in the first 10 months, reserves at a comfortable level, and the banking system remains sound. So we are in a good position at this moment,” Tetangco said.
Metropolitan Bank & Trust Co. said in a report that the US dollar bullrun continued, with some currencies trading at multi-year lows against the greenback.
“With the expected Fed rate hike just around the corner, expect volatility to continue as players adjust for positioning and profit-taking. For USD/PHP, the local pair has been printing new year-to-date highs almost everyday with ease as the topside seems to be the path of least resistance,” Metrobank said.
