Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. warned that trade shocks pose a greater and more persistent threat to the economy than typical supply shocks.
“Supply shocks come and go, [but] this kind of shock that we are seeing now tends to stick around,” Remolona said during the International Monetary Fund flagship seminar “The Evolving Art of Monetary Policy in Emerging Markets,” on April 25, 2025 at the sidelines of the IMF-World Bank Group (WBG) Spring Meetings
“Trade shocks tend to affect investment in the longer term, partly because investment goods tend to be highly dependent on imports,” said Remolona.
Remolona led the Philippine delegation to the Spring Meetings, joined by Monetary Board member Rosalia De Leon, assistant governor Zeno Ronald Abenoja and assistant governor Veronica Bayangos.
Other key officials present included National Treasurer Sharon Almanza and senior officials from the Department of Finance and Department of Budget and Management.
The BSP officials also participated in key meetings, including discussions with the IMF managing director and Association of Southeast Asian Nations (ASEAN) Finance Ministers and Central Bank Governors; credit rating agencies; and investor briefings with Citi, JPMorgan and Bank of America.
They also held a bilateral meeting with Her Majesty Queen Máxima of the Netherlands in her role as the United Nations Secretary-General’s Special Advocate for Financial Health.
Remolona, during the panel discussion, warned that trade shocks could cause the capital stock to shrink, potentially resulting in a lower growth trajectory for developing countries.
“Unfortunately, monetary policy doesn’t have the tools for that kind of shock,” he said.
He said slowing inflation gives the BSP “more degrees of freedom to reduce policy rates.”
The BSP cut its key interest rate on April 10, 2025 to 5.5 percent. Following the move, the BSP governor said the central bank still has room to further ease monetary policy.
