benjamin e diokno : 2022 philippine economic outlook - broadbased economic recovery and risks speech by mr benjamin e diokno, governor of bangko sentral ng pilipinas ( bsp, the central bank of the philippines ), at the young presidents ’ organization ( ypo ) philippines inc. event, manila, 2 march 2022. * * * good day, everyone. i would like to thank ypo philippines for inviting me to this event to share updates on the philippine economy. i will cover the following topics in my presentation : first, i will start with a discussion on the year that has been. next, i will discuss the bsp ’ s outlook on domestic output and inflation, as well as our assessment of the risks and challenges for the year ahead. i will conclude with some key takeaways and the bsp ’ s way forward. with the spread of more virulent covid - 19 variants, cases of covid - 19 continued to surge worldwide. accordingly, governments had to reimpose border restrictions and lockdown measures to protect people from contracting covid - related illnesses. expectations of a faster - than - expected recovery gradually abated as prolonged lockdown measures and stringent quarantine restrictions weighed on the growth prospects of select economies. private economists surveyed by bloomberg repeatedly downgraded their 2021 gdp growth forecasts for most emerging markets and developing economies, as covid - related uncertainties moderated optimism for a swift global recovery. despite expectations of a slowdown in global economic growth, the philippines showed signs of improved economic activity in 2021. during the fourth quarter of 2021, the economy grew 7. 7 percent, bringing the full - year growth to 5. 6 percent. the economy ’ s growth trajectory may further improve due to the projected expansion of exports in 2022. goods exports grew by 16. 0 percent in the first three quarters of 2021. the share of electronic products to total exports continued to increase in 2021 as global digitalization efforts increased the demand for semiconductors and other electronic components in 2021. the bsp projects goods exports to have grown by 16. 0 percent in 2021 amid rising global demand for tech products, such as semiconductors and other electronics. for 2022, exports are expected to grow by 6. 0 percent and imports by 10. 0 percent. this reflects the expected continued rebound in world trade and improvement in domestic consumer demand. employment indicators likewise improved in the third quarter of 2021. the unemployment rate dropped

##er of last resort. it gave banks unlimited access to liquidity at longer terms and against a wider set of collateral. and it began to buy covered bonds, which were a prime source of funding for banks. the ecb ’ s goal was to keep otherwise healthy banks alive. stabilising the banks was crucial to safeguarding price stability. however, as a lender of last resort, the ecb can only do one thing – provide liquidity to banks. it cannot and should not solve banks ’ underlying problems. in 2008, many banks were still bloated with bad debt. their problems went far beyond a mere shortage of liquidity. they were about to fail. that was the moment when governments stepped in to save the banks and to prevent a systemic crisis. this added to the pile of public debt that many governments had built up over the preceding years. and then the pile became too big for some countries. the stage had been set for the second phase of the crisis. in 2010, concerns started to grow in the markets that the greek state might default on its debt. the sovereign debt crisis had begun. similar fears spread to other countries. portugal, ireland, spain and italy faced rising borrowing costs, although the reasons for this were not always the same. this added to doubts about their public finances. once again, the banks were at risk ; this time because they had many government bonds on their balance sheets. on top of that, government bonds are a key benchmark for borrowing costs in the private sector. when markets arrive at a critical assessment of a country ’ s public debt, they put a risk premium on the private sector of that country. in this case, greek companies were suddenly faced with much higher interest rates than otherwise identical german companies. a financial market that had grown together over years broke apart ; it became much more fragmented. and that made it much more difficult to implement a single monetary policy. so once again the ecb had to step in to ensure that monetary policy remained effective. it began to buy government bonds through its securities markets programme, smp for short. for a while the smp helped to rein in uncontrolled surges in government bond yields. this ensured that monetary policy remained effective. however, in 2012 it became clear that more was needed as markets had gone one step further. they had begun to price in a break - up of the 2 / 6 bis central bankers'speeches euro area. the borrowing costs of governments surged,