BSP rejects 'unconventional measures' vs outbreak
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) sees no need for “unconventional measures” such as printing more money to cushion the economic fallout from the coronavirus disease-2019 (COVID-19) outbreak.
“No, we are not looking at any unconventional tools to address the COVID-19 pandemic. The BSP has a lot of conventional tools to address the crisis,” BSP Governor Benjamin Diokno said in a text message on Sunday.
As consumption gets tepid and businesses shuttered by COVID-19 outbreak, Diokno believes that lowering the policy rates, giving penalty reprieve to banks, and allowing lenders to increase lending to borrowers, as what the central bank did last week, are sufficient to support economic activity.
Those string of monetary support is mainly targeted at boosting liquidity in the financial system while keeping banks afloat during the month-long community quarantine of Luzon, where around 70% of economic output is put in danger by business closures, food supply constraints as well as consumers staying home as instructed.
Diokno’s statement came as a group of economists from University of the Philippines, called for BSP to unleash a “liquidity bazooka” as a direct response to the economic repercussions of COVID-19, and the necessary drastic response of a lockdown, in order to ensure there is enough money in the financial system.
'No such thing as off-limits'
For the group of economists led by Professor Emeritus Emmanuel de Dios, what the BSP has done so far “may not suffice to help the economy stay the course under a crisis.”
“The BSP should be ready to deploy unconventional monetary policy measures and provide the economic resources necessary to deal with the crisis,” the UP economists said in the paper titled “A Philippine Social Protection and Economic Recovery Plan.”
“The significant role of the ?BSP? in this crisis is to shore up confidence in the market and fully commit to its position as the lender of last resort given its monopoly power to print money,” it added.
Under their recommendations, economists put primacy on the government’s role to provide social protection during and after the outbreak, including ensuring everyone keeps their jobs, while small- and -medium enterprises are supported by tax breaks financial relief.
Monthly aid to poor around four million Filipinos already under the Pantawid Pamilyang Pilipino must also be increased, while “non-cash benefits” such as food, water and medicine must also be provided. On the government side, the nearly 160,000 contract workers it employed must be paid, while local governments must provide “isolation rooms” for suspected COVID-19 patients.
Exporters, importers as well as airlines must also be given cash support, the economists said.
As all these undertaking necessitates cash, the economists said fiscal support must be deployed to “save lives” and not to bring some sense of normalcy on economic activity, which would only recover if public social protection is ensured.
As for the BSP, the economists said: “There is no such thing as off-limits in its commitment to see the economy through this crisis by providing the ammunition to ensure that liquidity and credit markets do not dry up.”
Apart from De Dios, the recovery plan proposal was authored by Alfredo Paloyo, Cielo Magno, Karl Jandoc, Laarni Escresa, Ma. Christina Epetia, and Maria Socorro Bautista.
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