BSP’s Diokno defends ‘pro-growth’ tack

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Metro Manila (CNN Philippines, June 7) — Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said he does not take offense when critics and market watchers brand him as pro-growth.

Diokno took the BSP’s helm in March after his stint as Budget secretary of President Rodrigo Duterte, serving the remaining four years in the term of the late Governor Nestor Espenilla, Jr. Market watchers were quick to point out his distinct approach to central banking which they dubbed a “pro-growth” bias, as he comes from Duterte’s economic team working at the heart of the government’s “Build, Build, Build” program.

“Growth per se is not bad. The kind of growth that I am pursuing is sustained, balanced, and inclusive,” Diokno said Friday at the BusinessMirror Coffee Club.

“To attain that objective, we really need to have stable prices because the first major loser of inflation are the poor… This is consistent with sustained, balanced growth,” he added. “I have no apologies. If they call me pro-growth, that's okay.”

READ: Diokno assures public of central bank's independence

The BSP is essentially in charge of managing inflation and regulating the local banking system.

Economic growth slumped to a four-year low in the first quarter at 5.6 percent. That same day, Diokno and the members of the Monetary Board slashed interest rates by 25 basis points, marking the start of unwinding 2018’s series of rate hikes.

The BSP said the policy easing was in view of manageable inflation, which also factors in the “impact of budget delays” that held back economic activity during the first three months of the year. Still, demand remains firm thanks to household spending and the state’s infrastructure program, the central bank added.

READ: BSP trims interest rates amid softer inflation, slow growth

The same robust growth story has been attracting investor interest to the Philippines. Diokno said the BSP has been in talks with several foreign banks who want to enter the local market and take part in the local construction boom. Among the major inquiries are coming from Taiwan, South Korea, and Japan.

On the flipside, Diokno considers the escalating trade tensions between the United States and China as a key risk to the country’s growth outlook, but said the Philippines may have some to gain from the tit-for-tat tariff war.

In a separate forum, Finance Secretary Carlos Dominguez III said the economic team has crafted a catch-up plan meant to fast-track government spending in order to boost growth in the remaining months of 2019. Their goal is to spend ₱2.996 trillion between April to December just to push growth to 6-7 percent.

Meanwhile, Diokno said he is not worried about the pickup in May inflation from 3 percent to 3.2 percent, saying that it was a one-off trend due to the election season.

“It’s not a major departure from the trend. We’re optimistic that inflation will be 2 percent or below 2 percent by the third quarter,” the BSP chief said, adding he is “confident” that the full-year print will remain below 4 percent.

Inflation averaged 3.6 percent, well within the central bank’s 2-4 percent target range.