The Financial Stability Coordination Council (FSCC) recently released the country’s 2022 Financial Stability Report (FSR).
As Chairman of the FSCC, Bangko Sentral ng Pilipinas (BSP) governor Felipe M. Medalla led the release of the FSR. He was joined by the other heads of the agencies that make up the FSCC.
The FSCC is an inter-agency council where the principals from the BSP, the Department of Finance, the Securities & Exchange Commission (SEC), the Insurance Commission and the Philippine Deposit Insurance Corporation (PDIC) convene quarterly. These meetings provide the venue to assess possible systemic risks and to decide on appropriate macroprudential policy interventions.
In a media advisory, the FSR highlighted the importance of building the system’s resilience, amid fast-changing market conditions in a volatile, uncertain, complex, and ambiguous (VUCA) environment.
The BSP governor noted the country’s continuing recovery from the disruptions caused by the pandemic. He highlighted strong growth and improving employment figures. Yet, he also underscored the need to be prepared for the challenges ahead.
“The supply and distribution of key commodities such as oil and food are still not where they were pre-pandemic. These bottlenecks would keep consumer prices high. The policy response though, of raising interest rates, will eventually affect the demand side of economic activity. How these changing demand and supply patterns manifest in 2023 at the global stage remains to be seen,” the FSCC Chairman pointed out.
Interlinkages across commodities and across jurisdictions are the main story in the country’s latest FSR.
The discussion starts with macroeconomic issues that have an impact on financial markets. Another chapter then looks at how the changes in the financial market can also affect the macroeconomy. The FSR then shows how these global developments are likely to impact the Philippines.
Governor Medalla pointed out that “the current policy issues are systemic because of the interlinked cause-and-effect consequences that they create.”
“This is why systemic risk analysis is particularly challenging. We need to scope the key connections among stakeholders, understand their interlinked behaviors, and only then assess how the economy is affected,” he noted.
He added that “there is a lot of work done on granular data and newer methods of analysis that goes on behind the scenes. And all that is happening so that we minimize surprises in risks while we all live in a VUCA world.”
The FSCC Chairman emphasized that the Council’s thrust in promoting financial stability is invariably anchored on its commitment to safeguarding the continuous improvement of the welfare of Filipinos over time made possible by nurturing the resilience of the country’s financial system.
“Just as global risks play out, your financial authorities will always have the interest of Filipinos in mind both today and into the future,” he concluded.
The 2022 FSR can now be downloaded on the websites of the BSP and other FSCC-member agencies.