Many think the chair and members of the Monetary Board and the governor and deputy governors of the Central Bank/Bangko Sentral ng Pilipinas (BSP) are “independent" (a) because the Monetary Board was “created by the Constitution” and not by Congress and (b) because the BSP is under the control and supervision of the Monetary Board, a "constitutional creation".
On the contrary, and in a real political sense, the Executive controls these institutions and their officials, notwithstanding their managed image of “independence and professionalism”.
The Executive alone appoints the BSP governor, who is the chair of the Monetary Board. The Executive alone appoints the seven members of the Monetary.
Except for the BSP governor, the rest of the members of the Monetary Board are not confirmed by the Commission on Apportionments.
Only the BSP governor, who acts as the chair of the Monetary Board, is confirmed by the Commission of Appointments. (RA 7653, The New Central Bank Act).
Moreover, under RA 7653, the Executive may remove any member of the Monetary Board for cause.
The tendency of the pronouncements of the BSP governor and his subordinates during their regular press conferences is to support the political statements and economic projections of the Executive and his finance and economic team, i.e., the Department of Finance and the National Economic Development Authority (NEDA).
Just like all salaried bureaucrats, the Monetary Board and BSP officials must protect their career.
The Monetary Board and BSP officials seem to ignore the contrary views, consensus, forecasts, and studies that have been presented by respected international risks assessment firms and creditworthiness evaluation organizations, e.g., Moody’s Investor Service, Fitch Ratings, International Monetary Fund (IMF), and global investments banks led by DBS Bank Ltd of Singapore, about the “overheating” Philippine economy.
In so doing the Monetary Board and BSP officials wittingly or unwittingly encourage the “credit bubble” that is silently forming in the Philippines like an economic cancer.
The Dutertenomics (“golden era of infrastructure”) of the Executive is based on (a) excessive domestic and foreign debt, (b) aggressive deficit spending and (c) reckless credit bubble.
The subservient statements of the BSP officials create false hopes and rising expectations among the Filipino people, who are misled to believe that everything would be alright with the Philippine economy, despite clear warnings to the contrary by respected international economic and financial experts and analysts.
All bubbles bust.
When they do, inflation, stagflation, unemployment, depression and recession follow -- all of which would mean great human sufferings.
The proper stance to adopt is one of prudence and conservatism in economic and financial management.
Read below the latest presscon of the BSP officer-in-charge.
“x x x.
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said fears of overheating due to strong credit and liquidity growth remain unfounded amid the country’s sound macroeconomic fundamentals.
BSP officer-in-charge Diwa Guinigundo said the growth potential of the Philippines has gone up compared to previous years as the economy has become more productive, particularly in terms of capital productivity.
“If you establish an analogy between growth and balloon, the balloon has grown. Even if you pump in more water or air, it can accommodate. It has a bigger capacity to do that without going into capacity constraint,” he said.
Guinigundo issued the clarification after flagged emerging capacity constraints such as labor shortages in certain sectors
that could push up inflation.
“I don’t know where that observation is really coming from because the numbers are quite clear. We have been enjoying an increase in economic growth against a backdrop of stable prices,” he added.
He explained the labor market economics in the Philippines continue to be favorable amid the favorable demographic factors, with the young population and others joining the formal sector.
Aside from Moody’s, other debt watchers such as warned the Philippines was showing some signs of overheating.
The country’s gross domestic product growth improved to 6.5 percent in the second quarter from 6.4 percent in the first quarter, bringing the average growth to 6.4 percent in the first half of the year.
On the other hand, inflation averaged 3.1 percent in the first eight months of the year despite kicking up to a three-month high of 3.1 percent in August from 2.8 percent in July due to rising food and non-food prices.
“When you are going into capacity constraint, the tell-tale signs are very clear. If you have capacity constraint then that should tell on your inflation. In other words, inflation should be surging but it is not,” he said.
The BSP has set an inflation target of between two and four percent from 2017 to 2019. The central bank’s Monetary Board sees inflation averaging 3.2 percent in 2017 and 2018 before tapering off to three percent in 2019.
Furthermore, the BSP deputy governor said bank lending grew 19.2 percent while liquidity expanded 13.5 percent in July to support the country’s growing economy.
“Credit is rising no doubt because the economy is also expanding. You need credit and you need more liquidity to finance economic growth,” Guinigundo said.
According to Guinigundo, authorities continue to use some parameters to check whether credit growth is reaching serious proportions.
“Based on the parameters that we are using, we are far from those thresholds that should tell us that we are nearing serious proportion or a point where one can say that there is over extension of credit or overheating,” he added.
He said the movement of the peso against the US dollar is consistent with the economic fundamentals of the country.
Although the local currency has depreciated by more than two percent this year, he explained the peso has appreciated by 0.9 percent over the past 10 years.
X x x.”
