Global risks worry BSP
Despite remaining resilient, the Philippine financial system warrants close monitoring amid a slew of global uncertainties, according to the central bank.
In its 60-page report, the Bangko Sentral ng Pilipinas (BSP) said financial stability was at moderate risk due to heightened geopolitical tensions, evolving monetary policies in major economies and shifts in the United States’ leadership.
The 2024 Financial Stability Report also noted rising cost pressures and changes in trade and monetary policies, contributing to financial uncertainty.
“The World Uncertainty Index and the Global Economic Policy Uncertainty Index have been on an upward trend, indicating that businesses and investors are operating in an increasingly unpredictable environment,” the report said.
Supply chain disruptions remained a pressing concern, particularly in the industrial sector, as geopolitical instability and monetary easing impact production costs.
For businesses and financial institutions, debt refinancing and a “high maturity wall,” whereby large amounts of debt are nearing maturity, may present challenges, it added.
“Dampened consumption and investment activity may heighten credit risk, particularly for firms holding substantial short-term debt,” the report warned.
Apprehensions about borrowers’ debt-servicing capabilities could result in tighter credit conditions, the BSP said.
The BSP, however, acknowledged a silver lining for consumers. “Declining global food inflation is easing pressure on household budgets, while [Association of Southeast Asian Nations] economies stand to benefit from supply chain reconfigurations and trade realignments,” it added.
