BSP recalibrating COVID-19 measures

MANILA, Philippines — Monetary authorities continue to carefully calibrate various regulatory relief and supervisory measures to ensure recovery from the pandemic-induced economic recession, according to the Bangko Sentral ng Pilipinas (BSP).

In his first ever ‘Ulat sa Bayan,’ BSP Governor and Monetary Board chairman Benjamin Diokno said the central bank would slowly recalibrate some of its tools as the economy recovers from a record economic contraction after the gross domestic product (GDP) contracted by 9.5 percent last year due to the impact of the pandemic.

The COVID-19 response measures of the BSP unleashed P2 trillion into the financial system, keeping the economy afloat amid the global health crisis.

“With this amount of liquidity, we are carefully assessing the appropriate timing of the unwinding of all these measures. Doing this too late or too early may have serious repercussions on the economy,” Diokno said.

Aside from the massive 200-basis point interest rate cuts and the lowering of the reserve requirement ratios (RRR) for banks, the central bank also entered into a P300-billion repurchase agreement with the Bureau of the Treasury settled in September last year, extended a P540-billion provisional advance to the national government paid in December last year, and another P540 billion non-interest bearing loan in January.

Monetary authorities also issued time-bound and targeted regulatory and operational relief to encourage banks to continue their support to the economy by counting loans to micro, small and medium enterprises as compliance to the RRR, higher single borrower’s limit as well as increased limit to real estate loans.

“To mitigate the impact of the pandemic, we acted quickly by providing monetary stimulus to ease tightening liquidity conditions, boost business and consumer confidence, and ensure the continued orderly functioning of the financial system,” Diokno said in his report.

These measures were supposed to encourage more borrowings to boost economic activity, but banks were risk-averse resulting in a decline in lending for the first time in 14 years due to uncertainties brought about by the pandemic.

The BSP chief pointed out the current crisis gave authorities an opportunity to think out of the box and be bold in order to protect the interest of the Filipinos.

“While the future remains clouded with unusual uncertainty, our eyes are focused on green shoots in front of us as we remain ever-vigilant in addressing the what-ifs. Times are changing and we are geared up for it,” Diokno said.