Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said recent indicators suggested that the Philippine economy already approached what he called its “inflection point” amid the coronavirus pandemic.
“At the moment, we are already at an inflection point,” Diokno told attendes of the Citi Macro Conference – Philippines on Monday.
Financial website Investopedia defines an inflection point as “an event that results in a significant change in the progress of a company, industry, sector, economy or geopolitical situation and can be considered a turning point after which a dramatic change, with either positive or negative results, is expected to result.”
“Early signs of recovery include growth in remittances in June and July from declines the previous months, as well as growth in FDI (foreign direct investments) in May and June following contractions [in] the previous months,” Diokno said.
Personal remittances — personal transfers, whether in cash or kind, and capital transfers between households — in June rose for the first time in three months by 7.6 percent to $2.73 billion. This was followed by another 7.6-percent surge in July, which puts these inflows at $3.08 billion.
Net FDI inflows fell by 42.4 percent to $399 million in May before climbing by 7.1 percent to $481 million in June.
“The Purchasing Managers’ Index (PMI) improved from 27.5 in April to 50.2 in September. The value and volume of production for the manufacturing sector also improved from March to July,” Diokno added.
The PMI takes into account new orders, output, employment, suppliers’ delivery time and stocks in manufacturing sector. Readings above 50 signal an expansion; below that, a contraction.
The Bangko Sentral governor also said the year-on-year contraction in imports had slowed from 65.3 percent in April to 24.4 percent in July. The decline in exports, meanwhile, eased to 9.6 percent in July from 49.9 percent in April.
“Speaking of inflection point, the BSP is mindful of the need for careful disengagement of our [coronavirus disease 2019] response measures. We recognize that doing so either too late or too early may have serious repercussions on the economy,” he added.
Over the medium term, the central bank chief said, the economy is poised to become stronger, more technology-driven and much more inclusive.
“The intention is for all Filipinos to reap the benefits of economic development,” he added.
The Philippines plunged into a technical recession after domestic output fell by a record 16.5 percent in the second quarter and 0.7 percent in the first. This brought the contraction in gross domestic product (GDP) to 9 percent in the first half.
The government has an adjusted assumption of a 5.5-percent economic contraction this year. It expects the economy to expand by 6.5 to 7.5 percent next year.