Philippines central bank sees reform continuity, solid growth this year

MANILA, May 20 (Reuters) – The Philippine central bank chief said on Friday president-elect Ferdinand Marcos Jr. is better placed than his predecessor to face economic challenges and that he expects structural reforms and infrastructure build-up will continue under the new administration.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno, speaking at an Asian Development Bank Institute forum, said there are clear indications that key reforms will continue under Marcos, who takes office next month and will command a supermajority in Congress.

A smooth transition of power, and the newly-elected leader’s “overwhelming mandate” should help sustain economic growth and investor confidence, he said.

“They have also indicated that they are going to continue what’s being done by the current administration, which is strong on public infrastructure,” Diokno said, referring to Marcos and his political allies that include Vice President-elect Sara Duterte-Carpio, the incumbent leader’s daughter.

Diokno also said the next administration will inherit “a better state of infrastructure” and a “more robust economy”, putting this year’s growth on track to hit the 7%-9% target.

But like the rest of the world, he said the Philippines faces risks to its growth outlook, such as a deterioration in the COVID-19 situation and a prolonged Russia-Ukraine conflict.

The BSP has taken measures to sustain the growth momentum by addressing rising inflationary pressures, with a 25 basis points increase in interest rates effective Friday, its first hike since 2018.

Diokno said the BSP’s policy tightening cycle has begun, adding that its “exit strategy” after undertaking “extraordinary” measures to support the pandemic-hit economy will be rolled out in a gradual manner.

The BSP’s policy actions will be “well-communicated” and guided by the inflation and growth outlook over the medium term as well as the public health situation, he said.

(Reporting by Karen Lema and Enrico Dela Cruz; Editing by Ed Davies and Kanupriya Kapoor)