BSP: Trade shocks pose higher risk

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. has warned that trade shocks are more damaging than supply shocks—as they can shrink the country's capital stock and slow growth—which monetary policy is not equipped to address.

- BY DERCO ROSAL

Remolona said at the International Monetary Fund (IMF) meetings in Washington, D.C. that trade shocks are more challenging to manage than supply shocks and could have lasting impacts on the economy.

"Supply shocks come and go, [but] this kind of shock that we are seeing now tends to stick around," Remolona said during the IMF flagship seminar centered on the evolving art of monetary policy in developing countries on April 25. This event was held on 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," Remolona further said.