The Bankers Association of the Philippines (BAP) held its BAP CEO Forum last July 21 — a quarterly gathering of executives in the banking sector to discuss issues relevant to the local and global economy.
In his opening remarks, BAP President Antonio Moncupa hailed the resumption of the forum, which was held last 2018 when it was called the Bankers’ Assembly.
“It is designed for CEOs and senior officers of BAP member-banks and aims to provide an opportunity to interact with thought leaders on relevant issues affecting the economy and banking [industry],” he said.
Moncupa also highlighted the various headwinds affecting the Philippines.
“I am pretty sure we are all thinking about how the economy — and consequently the banks — will fare in the face of lingering COVID-19 virus, the global inflation, the resulting monetary tightening cycle, the Ukraine war, the recession talk in major economies that is getting louder by the day, the uncharacteristically negative outlook for China, the muscular dollar, and the expected slowdown in world economic growth,” he noted.
In light of these challenges, two keynote speakers were invited to the BAP CEO Forum to share their insights and brief the banking sector about the economy.
The first speaker was Amando M. Tetangco Jr., former Governor of the Bangko Sentral ng Pilipinas from 2005 to 2017. Drawing from his expertise in monetary and banking sector policies, his discussion focused on “Storm Clouds Brewing: Forging Through the Fiscal and Financial Headwinds Ahead.”
He cited three pressing storm clouds: rising debt across countries, surging global inflation and policy normalization in advanced economies. “The dangerous trend of increased debt is present domestically and internationally. The slowdown of economic activity, combined with increased expenditure payout, has forced governments, including the Philippines to borrow from domestic and foreign sources,” he said.
“Domestically, a plan for fiscal consolidation to improve the debt situation needs three key factors – continuous growth, balance in managing the effort to reduce fiscal deficits without undermining the recovery and sustaining the program to bring down debt ratios which can take years,” he added. Tetangco also said clearly communicated medium-term plans based on specific measures and backed by strong fiscal frameworks are keys to establish credibility.
On the banking system, Tetangco observed that earlier reforms allowed banks to enter the pandemic in a position of strength and helped the system absorb the headwinds while remaining sound and robust. In fact, banks’ capital adequacy and liquidity ratios have improved.
“The sound financial system enabled the effective intermediation of funds to productive sectors as outstanding loans quickly recovered after a brief period of contraction,” Tetangco said. “Nevertheless, challenges remain and banks need to be resilient, more technologically advanced, more sustainable and inclusive than ever before.”
Tetangco concluded that in addressing the complex nature of the risks that continue to confront us, a whole-of-government approach which calls for greater coordination of fiscal, monetary, and financial policies are needed.
The second speaker was Cielito Habito, an economics professor at the Ateneo de Manila University and former Secretary of Socio-economic Planning and head of the National Economic and Development Authority. His discussion was about “Back to Basics: The Way Forward for the Philippine Economy.”
Habito went into detail on ways to improve the current macroeconomic environment, along with his projections for the economy with the new administration. “We must put people first, maximize our land and water resources, and reshape our services,” he explained.
He gave a brief summary of his observations using his “PiTiK test” (Presyo, Trabaho, Kita) approach to describing the current performance of the economy. Habito noted accelerated increases in prices of commodities (Presyo), a shift in employment toward the agricultural and informal economy (Trabaho), and the better-than-expected growth in GDP, now recovering from the deep contraction at the height of the pandemic. (Kita)
Habito emphasized the importance of the agricultural sector, noting it had been resilient during this pandemic even as the industry and services sectors sank deeply, and is the economic sector that is prevalent in all regions of the country. “The agricultural sector is the true backbone of the Philippine economy,” he argued. “To improve the sector, we can simply copy the example of our ASEAN peers in how they have managed their agricultural sectors and turned them into big export earners,” he continued. He noted how far behind the Philippines has fallen in export performance compared to its ASEAN peers, and argued for outward-looking economic policy-making to tap wider opportunities for economic growth and domestic job creation. Part of this, he said, is active participation in trade agreements like the Regional Comprehensive Economic Partnership, which has yet to be ratified by the Philippine Senate.
With the projections of Gov. Tetangco and Prof. Habito, the Philippine economy is well on the way to recovery but external challenges and the lingering pandemic effects make the way ahead particularly challenging for the country’s economic managers. They welcomed the appointment of competent economic managers in the Marcos Cabinet, and expressed optimism on their ability to steer the economy in the face of strong headwinds ahead.
