BSP chief gets B+ grade from Global Finance

MANILA, Philippines — New York-based business magazine Global Finance has given Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. a Grade of B+ more than a year after assuming his post.

In its Central Bank Report Cards 2018: End of Easing Street, Global Finance said many emerging market central banks have been forced to raised interest rates this year to prop up their currencies in the face of a stronger US dollar.

It added central banks have also used their foreign currency exchange reserves to intervene heavily in the foreign exchange market.

The BSP’s Monetary Board has so far raised interest rates by 150 basis points to curb rising inflationary expectations. It lifted interest rates by 25 basis points for the first time in more than three years last May 10 followed by 25 basis points on June 20, 50 basis points – the biggest in a decade – last Aug. 9, and 50 basis points last Sept. 27.

Inflation averaged five percent in the first nine months after leaping to a near 10-year high of 6.7 percent in September from .4 percent in August due to higher oil price, more expensive rice and agricultural products after the onslaught of Super Typhoon Ompong, and the weak peso.

The central bank now expects inflation to average 5.2 percent instead of 4.9 percent this year and 4.3 instead of 3.7 percent next year, both exceeding the BSP’s two to four percent target.

Aside from rising inflation and a depreciating peso, Espenilla is also battling early stage tongue cancer which was detected last November. He is currently on a one-month medical leave and is scheduled to return on Oct. 18.

The Philippines booked a slower gross domestic product (GDP) growth of six percent in the second quarter from the revised 6.6 percent in the first quarter, bringing the expansion to 6.3 percent in the first half.

On the other hand, the peso is one of the weakest performing currencies in the region, shedding more than eight percent to hit a fresh 13-year low after piercing the 54 to $1 level due to the continued normalization of interest rates in advanced economies led by the US.

“The BSP said its actions were designed to safeguard macroeconomic stability in an environment of rising commodity prices and ongoing normalization of monetary policy in advanced economies,” Global Finance said.

Strong importation of capital equipment, raw materials, and intermediate goods to support the expanding economy as well as the massive infrastructure build up of the government under the Build Build Build program continue to put pressure on the local currency.

Espenilla, who is turning 60 on Oct. 12, replaced former BSP chief Amando Tetangco Jr. who was named one of the world’s top central bankers with a prestigious “A” grade in 2006 and 2007 from 2011 to 2016. Tetangco served an unprecedented two six-year terms until July 2017.

The Central Banker Report Cards, published annually by Global Finance since 1994, grades the central bank governors of nearly 75 key countries and the European Union on a scale of  “A” to “F” scale for success in areas such as inflation control, economic growth goals, currency stability and interest rate management.

Central bankers who earned the prestigious A grades this year include Philip Lowe from Australia, Mario Marcel Cullell of Chile, Mario Draghi of EU, Karnit Flug of Israel, Mahammad Youself Al-Hashel of Kuwait, Riad Salameh of Lebanon, Abdellatif Jouahri of Morocco, Carllos Fernandez Valdovinos of Paraguay, Elvira Nabiullina of Russia, and Lee Ju-yeol of South Korea.