BSP Chief: Trade Shocks Tougher Than Supply Shocks

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Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona Jr. said trade shocks are harder to manage than typical supply shocks and tend to have longer-lasting effects 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 “The Evolving Art of Monetary Policy in Emerging Markets” on April 25, 2025.

The seminar was held on the sidelines of the International Monetary Fund–World Bank Group Spring Meetings in Washington.

“Trade shocks tend to affect investment in the longer term, partly because investment goods tend to be highly dependent on imports,” Remolona added.

Governor Remolona led the Philippine delegation to the meetings, joined by Monetary Board Member Rosalia V. De Leon, Assistant Governors Zeno Ronald R. Abenoja and Veronica B. Bayangos.

Treasurer of the Philippines Sharon Almanza and senior officials from the Department of Finance and Department of Budget and Management were also part of the delegation.

BSP officials attended high-level engagements, including meetings with the IMF managing director, 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, who serves as the United Nations secretary-general’s special advocate for financial health.

In the panel discussion, Remolona warned that trade shocks could reduce capital stock, which may lower long-term growth potential for developing economies.

“Unfortunately, monetary policy doesn’t have the tools for that kind of shock,” he said.

However, he noted that slowing inflation is giving the BSP “more degrees of freedom to reduce policy rates.”

The BSP cut its key interest rate to 5.5 percent on April 10, 2025.

Following the cut, Remolona said the central bank still has room to ease monetary policy further.

The IMF–WBG Spring Meetings ran from April 21 to 26, 2025, under the theme “Anchoring Stability and Promoting Balanced Growth.”