Philippine Central Bank Contenders Pledge Stronger Toolsby
Deputy governors Espenilla, Guinigundo spoke in interviews
Central bank governor Tetangco scheduled to step down in July
Two of the main contenders for the job of central bank governor in the Philippines said global uncertainties require sharper monitoring of financial market risks.
Deputy Governors Nestor Espenilla, 58, and Diwa Guinigundo, 62, called for stronger measures to assess and analyze risks to financial markets. The nation’s “fundamentals” are solid, they said, referring to economic growth and inflation outlooks.
Their comments underline the risk of capital outflows from emerging nations as the U.S. economic expansion prompts the Federal Reserve to raise interest rates. U.S. President Donald Trump’s protectionism may hurt outsourcing companies and remittances, key drivers that have helped Philippines rank among the fastest-growing economies.
“The world is confronted with a lot of uncertainties. Perhaps more than the usual,” Espenilla said in an e-mail interview. Policy makers must employ “extra sharp surveillance and analysis” of the impact of global development and sentiment on trade, commodity prices, energy cost, remittances, and direct investment and portfolio flows, he said.
Guinigundo, in a separate e-mail, said “sharpening our tools is crucial” due to “new challenges in the external sector” and changing dynamic and interaction among economic and financial variables.
The two are among five possible candidates based on discussions with central bank watchers and local media reports.
The central bank must strengthen data on household and corporate debt and will enhance monitoring of funds flow in the economy and markets, Guinigundo, who is in charge of monetary supervision, said. “Establishing interrelatedness and interconnectedness of both stress factors and markets is critical,’’ he said.
“More ambitious financial market structural reforms should be pursued,’’ including the phased exit of high reserve requirements for banks, said Espenilla. The deputy governor, who is in charge of bank supervision, also suggested further easing of foreign exchange rules to reduce the number of black market trades.
Tetangco, who has headed the central bank since 2005, has succeeded in taming inflation to less than 5 percent for more than five years, allowing for a record-low benchmark interest rate. He has strengthened the country’s reserves, steered the economy through a global recession, and served as a pillar of stability for investors worried by President Rodrigo Duterte’s deadly war on drugs.
The central bank can rely on high reserves and low inflation to “deal with uncertainty and deliberately and carefully craft policy adjustments,” Espenilla said.
Inflation will be within the central bank’s 2 to 4 percent target in the next two years, and “in the absence of any game-changing developments in the horizon, our policy stance remains appropriate,” Guinigundo said.