BSP chief cites gains from banking sector reforms

By Joann Villanueva

July 25, 2023, 2:01 pm

<p>BSP Governor Eli Remolona Jr.</p>

BSP Governor Eli Remolona Jr.

MANILA – Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. on Tuesday underscored the importance of sustained policy improvement for the banking sector and its gains especially during the pandemic.

In a recorded message for the post-State of the Nation Address (SONA) Philippine Economic Briefing at the Philippine International Convention Center (PICC) in Pasay City on Tuesday, Remolona said the economy registered a strong rebound from the virus-induced pandemic partly because of the strong banking system.

“Unlike in previous crises, our banks formed part of the solution rather than part of the problem. This is, in part, due to our work in ensuring financial stability,” he said.

Among the improvements that helped strengthen the domestic banking system include the increase in bank’s capitalization as well as the changes in the capital ratios.

During the pandemic, the BSP also allowed banks’ borrowings to micro, small and medium enterprises (MSMEs) as alternative compliance to reserve requirement (RR) to boost economic activities and buoy domestic growth.

While various measures are being implemented to help lift the economy after a slump, inflation, both here and overseas, hampered the moves that will allow faster economic recovery.

“Fortunately, the BSP’s inflation-targeting framework has served us well in the face of unusual supply shocks. We continue to focus on our mandate of price stability and have dedicated our resources and attention in pursuit of this goal,” Remolona said.

He reiterated monetary authorities’ forecast that the rate of price increases will continue to decelerate and return to within the government’s 2 to 4 percent target band starting in the last quarter of this year.

“This is the range that we think is ideal for an economy like the Philippines when it is growing at full capacity,” he added.

The inflation rate peaked so far this year last January when it accelerated to 8.7 percent, the highest in 14 years.

It has decelerated since then with the June 2023 level at 5.4 percent.

The average inflation to date stood at 7.2 percent.

Meanwhile, Remolona said increased digitalization both in the banking and payments system can further boost the efficiency, competitiveness, and inclusion in the country.

He said authorities “are mindful and we will manage the attendant risks to ensure continued trust and confidence in this increasingly digital economy.”

“We want to bring more Filipinos into this financial fold, so that as many of us as possible can share in the fruits of economic progress,” he added. (PNA)