Staying the course, Duterte looks for the next best Philippine central bank chief

Whoever is picked as the next Philippine central bank governor, it will be President Rodrigo Duterte's second choice.
PHOTO: Reuters

MANILA - Whoever is picked as the next Philippine central bank governor, it will be President Rodrigo Duterte's second choice.

Duterte is expected to announce as early as this month a new chief of Bangko Sentral ng Pilipinas (BSP), after failing to get the much praised current governor, Amando Tetangco, to stay on for an unprecedented third term.

The president is seen favouring someone who will continue Tetangco's monetary policies and reforms that have kept the over $300 billion (S$421 billion) economy humming for years.

And the four names widely floated as potential successors - two deputy central bank governors and two veteran bankers - were expected to do just that.

The changing of the guard comes amid rising inflation, higher global interest rates and protectionism that could affect a key economic lifeline - the millions of Filipinos working abroad who send billions of dollars home. 

"We are in an important juncture. While overheating risks seem manageable for now...the BSP needs to ensure that stability will be maintained in the longer run," said Gundy Cahyadi, an economist at DBS, who believes the central bank will hike interest rates in May for the first time in 2-1/2 years.

Duterte, who delegates economic management to his technocrats, has said he will "largely" listen to Finance Minister Carlos Dominguez and other political leaders when choosing Tetangco's replacement.

The firebrand leader, who has targeted 8 per cent economic growth in the medium term, will also replace three other outgoing members of the monetary board, giving him a free hand in choosing a majority for the seven-member policy-making committee. 

"This is probably the most important appointment President Duterte will make," Dominguez, who is leading the selection process, told Reuters late last month.


The main names being floated as possible successors were BSP deputy governors Diwa Guinigundo and Nestor Espenilla, former trade secretary Peter Favila, and East West Banking Corp Chief Executive Antonio Moncupa.

All the candidates are considered more than qualified to run the central bank, and wouldn't radically alter Tetangco's policies when he steps down in July, several top bank executives told Reuters. 

"The policies put forward by Governor Tetangco and his team are lasting legacies," said an official at one of the Philippines' top lenders.

"They are good policies that any incoming governor would benefit from. For us, one of the things we're hoping for is continuity," said the official, who requested not to be named because of the sensitivity of the issue.

Without resorting to extreme policy measures, Tetangco has significantly brought down inflation, shored up foreign exchange reserves, and steered the economy through the 2008 global financial crisis, with the Philippines among the few Asian nations to have avoided recession.

It was under his watch when Manila's long history of junk-debt status ended. Fitch, S&P and Moody's awarded the country with investment-grade status in 2013, owing to a strong external profile, low inflation and a shrinking budget deficit.

Under Philippine law, Tetangco can only serve two six-year terms.

He told Reuters in January, he preferred "someone with central banking background" to succeed him.

"The current strength of the economy owes much to the prudent policy path struck by Governor Tetangco and his team,"said Frederic Neumann, co-head of Asian Economics Research at HSBC. 

"In the coming years, the Philippines faces some tough macroeconomic challenges, including maintaining exchange rate stability amid a falling current account surplus and preserving price stability amid surging demand."

More about
Rodrigo Duterte