media and research - speeches the philippines : gearing up for greater heights date : may 29, 2022 occasion : bbva investor roundtable discussion speaker : bsp governor benjamin e. diokno good day, everyone. thank you to bbva for giving us the opportunity to update you on the philippine economy. allow me to highlight our connection with spain. over the years, spain has been an important ally, contributing to our trade growth. spain and the rest of the european union support our initiatives, particularly the build, build, build program, which i will be talking in detail. the philippines has successfully managed the covid - 19 health crisis on the back of strong fundamentals built through decades of structural reforms and sound macroeconomic management. after the pandemic - driven recession in 2020, the economy grew by 5. 7 percent last year and 8. 3 percent in the first quarter this year. we attribute this to much - relaxed mobility and activity restrictions as the country was able to manage the spread of covid - 19. growth in the first quarter was broad - based. on the supply side, all sectors expanded, driven by industry at 10. 4 percent, followed by services at 8. 6 percent. on the expenditure side, growth was driven by 10. 1 - percent increase in private consumption, a stark reversal of 4. 8 - percent contraction in the same quarter a year ago. investments and external trade performed well, too. its latest robust performance has made the philippines the fastest growing economy in the region. the employment picture is close to pre - pandemic level. from a peak of 17. 6 percent in april 2020, unemployment rate was down to just 5. 8 percent in march this year. foreign direct investments reached an all - time high last year. in the first two months of the year, fdis grew by 8. 0 percent to usd1. 7 billion. manufacturing activity has strongly rebounded, with the purchasing managers ’ index at 54. 3 in april, the highest in four years. all these came on the back of a whole - of - government approach to pandemic recovery. in tandem with the national government ’ s efforts, the bangko sentral ng pilipinas implemented its own array of covid - response measures. in sum, the central bank has injected over php2. 2 trillion, or approximately us $ 41. 9 billion into the financial system. this is equivalent to about 11. 3 percent of gdp. even

the service area branch managers were asked to have an ongoing dialogue and rapport with the ngos and the shgs of the area for effecting linkage. banks were also advised that shgs, registered or unregistered, which engaged in promoting the saving habits among their members, would be eligible to open savings bank accounts with banks irrespective of their availment of credit facilities from banks. it was also decided that flexibility allowed to banks in respect of margins, security norms, etc., as part of the pilot project for savings - linked loans to shgs would continue. further it was decided that nabard would continue to provide refinance to banks under the linkage project at the rates stipulated by nabard. it was also decided that banks may charge interest on the finance provided to the groups / ngos for on - lending to shgs at the rates indicated by the nabard from time to time. further, the shgs were to be free to decide on the interest rate to be charged to their members, provided the rate of interest was not excessive. while close coordination between the nabard and the rbi characterised the growth of the microcredit movement till 1999, the government of india took an active interest in the subject as evidenced by the successive announcements in the budget speeches of finance ministers since 1999. however, the announcements related essentially to shg programme, except in the budget speech of 2005 where there was a separate and distinct reference to mfis, with a mention of a suitable legislation, though the thrust remains to be the linkage with the banks for providing financial intermediation. the budget speech states : “ at present, micro finance institutions ( mfis ) obtain finance from banks according to guidelines issued by the rbi. mfis seek to provide small scale credit and other financial services to low income households and small informal businesses. government intends to promote mfis in a big way. the way forward, i believe, is to identify mfis, classify and rate such institutions and empower them to intermediate between the lending banks and the beneficiaries. commercial banks may appoint mfis as “ banking correspondents ” to provide transaction services on their behalf. since mfis require infusion of new capital, i propose to re - designate the existing rs. 100 crore micro finance development fund as the “ micro finance development and equity fund ”, and increase the corpus to rs. 200 crore. the fund will be managed by a board consisting