Philippines Central Bank Statement

Author: | Published: 19 Oct 2018
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The Bangko Sentral ng Pilipinas (BSP) is committed to its price and financial stability mandates, which have provided an environment conducive for sustained economic growth and stability over the years.

Philippine economic growth has remained solid for 19 years to date and has been supported by a favourable inflation environment, manageable external payments position, adequate buffers and a sound banking system. This also followed decades of purposeful structural and regulatory reforms and upgrades in investment sovereign ratings that allowed greater access to market financing. With these developments, the BSP has set its sights on continuously pursuing progressive and dynamic reforms to achieve greater monetary and financial stability for broad-based growth.

In 2016, the BSP formally shifted its monetary operations to an interest rate corridor system (IRC) to improve the transmission of monetary policy. To ensure that inflation continues to be low and manageable, the BSP follows an established process in its periodic review of monetary policy. We will continue our monetary policy approach and remain committed to the inflation targeting framework.

Leveraging on the financial system's current position of strength, we will continue to pursue proactive micro and macro prudential reforms to maintain resilience against domestic and external shocks.

Building on the gains of earlier reforms, the BSP is also ready to help push the economy toward the next stage of development through bold reforms for a more efficient, flexible, market-driven and inclusive financial sector. These aim to develop deeper money, debt and foreign exchange (FX) markets that systematically build the country's resilience by reducing reliance on external funding and insulating the domestic economy from external shocks.

In this regard, we are committed to more market-based monetary operations. The success of the IRC as an effective liquidity management tool has enabled us to initiate a phased and gradual reduction of the reserve requirement ratio (RRR) to increase reliance on market-oriented monetary tools and promote a more efficient financial system by lowering intermediation costs. By the middle of 2018, we have already rolled back the RRR by 200 basis points.

At the same time, we are pursuing initiatives to deepen the local currency debt market, which will aid in funding infrastructure and investments, thereby sustaining the economy's growth momentum.

To deepen the FX market, we have liberalised FX administrative requirements imposed through the banking system and strengthened oversight over the non-bank parallel market. We are working with our stakeholders for clearer governance arrangements that promote fair conduct and price transparency.

To support our financial inclusion agenda, we are championing an enabling environment for the digitalisation of the payments system. Our flagship project, the National Retail Payments System (NRPS), is expected to boost economic activity by making an inter-operable, safe and efficient real-time digital payments system available.

The BSP will remain watchful and vigilant and will continue to utilize analytical and surveillance tools to timely identify potential risks to its monetary and financial stability objectives. More importantly, we have the independence and the capability to act decisively.