BANGKO SENTRAL ng Pilipinas (BSP) Governor Nestor A. Espenilla, Jr. got the third-highest rating for his first year as central bank chief, with the Global Finance magazine touting sustained economic growth while noting the weaker peso and a wider trade gap as setbacks.
Mr. Espenilla received a “B+” grade from the New York-based publication. Global Finance releases an annual report card for central bankers, with the 2018 scores printed in their October edition.
This is the first time the magazine graded Mr. Espenilla after he assumed the post in July 2017, with the publication saying it was “too early to tell” during the previous year’s grading period. Prior to this, Mr. Espenilla was deputy governor for the Supervision and Examination Sector in charge of regulating banks and financial firms.
Global Finance covers 89 central bank governors around the world, with the highest rating of “A” given to the best-performing monetary authorities with “F” marking the lowest. They are judged based on their hand on inflation control, economic growth, currency stability and interest-rate management, as well as their ability to “protect independence” amid political pressure as well as financial supervision.
In grading Mr. Espenilla, Global Finance took stock of the BSP’s two tightening moves in May and June worth 25 basis points (bp) each.
“The BSP said its actions were designed to safeguard macroeconomic stability in an environment of rising commodity prices and ongoing normalization of monetary policy in advanced economies,” the magazine said.
The central bank kicked off a series of rate hikes earlier this year in the face of surging inflation, which has been picking up since the year opened. The BSP’s Monetary Board has raised benchmark rates by a total of 150 bps as of their September meeting in a bid to arrest elevated inflation expectations, even as price drivers are largely “supply-driven” amid surging oil prices; thin stocks of rice, vegetables and meat; plus the impact of the government’s tax reform program.
Inflation has since worsened to a nine-year high of 6.7% in September, with the current tally averaging five percent versus the 2-4% central bank target.
Still, Global Finance saw that growth prospects remain upbeat, but flagged key weaknesses for the Philippine economy.
“The Philippine economy grew at an annual rate of 6.8% in the first quarter of 2018, close to the target growth rate of 7% to 8% for the year,” the report card read. “Employment and wages are rising, but the Philippine peso slumped to a 12-year low as government spending on infrastructure drew in imports, widening the current account deficit.”
First-quarter growth has been revised to 6.6% while second-quarter expansion clocked in slower at six percent, which brought the first-half tally at 6.3%.
The peso has been trading near a 13-year low above P54 versus the dollar, while the current account has widened to a $3.1 billion deficit as of end-June from a $133-million gap during the same period last year.
Mr. Espenilla’s first year in office saw a 200bp reduction in bank reserves, a move meant to reduce the cost of money and seen to help deepen the local debt markets. He has also set sights on increased use of financial technology to bring more cash-based transactions into digital platforms for cheaper and easier access to money.
Mr. Espenilla is currently on a month-long medical leave for treatment. He was diagnosed with early-stage tongue cancer in November 2017.
Eleven central bankers were graded “A” by Global Finance, namely the governors in Australia, Chile, the European Union, Israel, Kuwait, Lebanon, Morocco, Paraguay, Russia and South Korea.
Former BSP Governor Amando M. Tetangco, Jr., who held the post for two terms from 2005 to 2017, received the top “A” grade from Global Finance for eight of his 12-year stint. — Melissa Luz T. Lopez