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MANILA: The worst is over for the pandemic-hit Philippine economy, and a ‘remarkable rebound’ is expected this year, the central bank chief said on Tuesday, adding that the current accommodative monetary stance is sufficient for a revival in growth.

“The worst is behind us. The recovery phase has begun,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told the Reuters Next conference, citing ‘green shoots’ such as improvements in remittances and foreign direct investments.

Speaking ahead of the release of the 2020 GDP data on Jan. 28, Diokno said he also expected ‘solid’ growth in the December quarter and ‘double-digit’ growth in the second quarter of this year.

He added that “the current policy is sufficient to carry us through” after the economy suffered its first recession in nearly three decades in 2020.

Gross domestic product growth is forecast between 6.5%-7.5% this year, after last year’s projected contraction of 8.5%-9.5%, he said.

The consumption-driven Philippine economy was one of Asia’s fastest growing until the pandemic prompted President Rodrigo Duterte to impose one of the world’s strictest and longest lockdowns, triggering a dramatic slowdown in domestic spending.

Remittances by Filipinos abroad, a life blood of the economy, dropped 0.9% in the first 10 months of 2020 from a year earlier.

To revive growth, the BSP delivered five interest rate cuts totalling 200 basis points last year, with the benchmark overnight reverse repurchase facility rate at a record low of 2%, making it among the world’s most aggressive in policy easing.

It also cut banks’ reserve requirement ratio by 200 basis points and provided extra liquidity support by purchasing government securities and extending loans to the government.

In sum, the BSP has injected about 2 trillion pesos ($41.6 billion) into the financial system, equivalent to 10% of the country’s GDP.

Diokno said inflation, which averaged 2.6% in 2020, will remain within the 2%-4% target range this year and in 2022, providing space for the BSP to further support growth, if necessary.

The country’s COVID-19 vaccine rollout would be “a plus to GDP growth”, he said, adding that he does not expect a resurgence in infections.

The government has gradually lifted the coronavirus restrictions, but some analysts have warned a slow vaccine rollout and weak fiscal support could derail the economy’s recovery.

The Southeast Asian nation, which trails regional peers in securing vaccines, has sealed initial supply deals, aiming to inoculate 70 million people, or two-thirds of the population, starting next month.—Reuters