All eyes now on handover of power at BSP

The big three credit-rating agencies, especially Fitch Ratings, are watching with a keen eye how smoothly the transition happens as the Bangko Sentral ng Pilipinas transits from BSP Governor Amando M. Tetangco Jr. to whoever it is President Duterte will appoint as agency head come July 3.

Fitch said the BSP has a lead role in helping keep the $292-billion economy clearly on a sustainable growth path, an objective easily said than done, unless the top dog at the central bank has unquestioned credibility like his predecessor.

But Tetangco gave assurance on Thursday the BSP should thrive even after he steps down as he cited the role that will be played by “highly capable officers and staff” as he ends decades of central bank service.

Fitch, in its assessment of Philippine economic dynamics, said the BSP has proven effective in communicating its monetary-policy decisions, “given the maintenance of modest inflation levels, and the foreign exchange managed float regime [that] allows the peso to act as a cushion against external shocks”.

“The upcoming transition to a new central bank governor will be important in the context of policy stability and credibility,” Fitch particularly said.

As for the change of leadership that Fitch noted in its report, Tetangco reiterated the “BSP is a strong institution with highly capable and experienced officers and staff.”

“Sound monetary policy-making and prudent supervision of the banking system will continue after the leadership transition,” he said.

Tetangco is the first BSP governor to serve two consecutive terms under two administrations. Prior his appointment in 2005, Tetangco was a career central banker for some 40 years.

Earlier, he said he would rather that his successor come from within the institution, as extensive experience with central banking is crucial in getting the work done for the position.

Among the front running BSP governor are EastWest Bank President Antonio Moncupa, earlier endorsed by Senate President Aquilino  Pimentel III; Deputy BSP Governor Nestor A. Espenilla Jr., who heads the supervision and examination sector; BSP Deputy Governor Diwa C. Guinigundo, who heads the monetary stability sector; and Peter Favila, a former Monetary
Board member.

At the Department of Finance, Finance Secretary Carlos G. Dominguez III said, Fitch’s affirmation on the continued creditworthiness of the Philippines and giving it a positive outlook is proof that so-called political noise failed to dampen the country’s growth and that its macroeconomic underpinnings and political stability should persist even with Duterte’s war on illicit drugs and other crimes.

“Fitch’s latest affirmation of its positive outlook on the Philippines only means that the political chatter emanating from certain quarters has failed to dent the country’s sustained-growth narrative resulting from its strong economic performance, continued political stability and aggressive infrastructure and human capital investments under the Duterte presidency,”
Dominguez said.

“Given the positive outlook of Fitch Ratings and other institutions, the government has more reason to highlight on the country’s growth story by moving ahead on such policy reforms as its Comprehensive Tax Reform Program to ensure the financial sustainability of its ambitious program to eradicate poverty and transform the Philippines into a high-income economy in one generation,” he added.

Fitch said the economy should grow 6.8 percent this year and 6.7 percent in 2018 or within the target, in part because of increased spending on infrastructure.

With a report by Rea Cu





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