MANILA - Bangko Sentral ng Pilipinas Gov. Benjamin Diokno said Monday the Philippines could recover from the "temporary" economic plunge due with its strong fundamentals.
Compared to the high interest rates and depreciating peso during the Asian and the global financial crisis, the Philippines today has a sound banking system and one of the strongest currencies in the region, Diokno told ANC.
The second quarter gross domestic product contracted by 16.5 percent, reflecting the full impact of lockdowns imposed to arrest the spread of COVID-19.
Stress tests conducted on the banking sector revealed that it can survive even if non-performing loans reach 5 percent this year, Diokno said. The NPLs were at 2 percent in 2019, he said.
Both the non-performing loans and the debt-to-GDP (gross domestic product) ratio are low, he said.
Key interest rate is at a record low of 2.25 percent, which can boost lending in the coming months, the central bank chief said.
"This crisis is different from the crisis that I’ve seen in my lifetime. This is going to be temporary, so as soon as consumer confidence is back, as soon as business sector investment is back, I think we’ll recover as quickly as possible," Diokno said.
"Nowadays it’s different, the peso is one of the most appreciated currencies in this part of the world, our gross international reserves is at record high at $93.4 billion," he added.
Diokno said the BSP still has lots of bullets in its arsenal, which could be deployed if needed. However, monetary policy is "not the only game in town," he said.
The social security system, insurance system, fiscal stimulus, the local government and the population all have roles to play to weather the pandemic, Diokno said.