Why Philippines said 'yes' to Dr No as central bank chief

The unexpected appointment of Benjamin Diokno as Philippines central bank governor has raised eyebrows as markets adopt a wait-and-see attitude over his doveish monetary approach.

Surprise new Philippines central bank governor Benjamin Diokno has been known to bat off concerns over his approach to monetary policy by invoking the spirit of movie master spy, James Bond.

Referencing the baddie in the first-ever 007 film in 1962 and the phonetics of his surname,  the 70-year-old economist said “that’s why they call me Dr No,’’ when questioned about what some regard as his dovish fiscal leanings.

Diokno, the former secretary of budget and management, formally assumed the position of Bangko Sentral ng Pilipinas (BSP) governor on Tuesday (March 5) after his unexpected appointment by President Rodrigo Duterte.

The move follows the death from cancer last month of his predecessor, Nestor Espenilla Jnr. Diokno was also budget secretary under former presidents Joseph Estrada and Corazon Aquino.

Analysts have described his appointment as unusual because the central bank governor is normally replaced by one of his deputies.

And while Diokno has yet to make any formal monetary statements, market watchers are labelling him dovish on the back of comments he made about fiscal spending during his time as budget secretary.

As part of Duterte’s economic team, Diokno helped put in place measures to ease inflation from near 10-year highs in 2018. 

Inflation has been cooling as oil prices ease and as the impact of higher and new taxes that had been imposed on commodities begins to fade. Some analysts say that because inflation has improved, it is possible that that the central bank might start to unwind some of last year’s tightening.

A treasury research report published by OCBC Bank yesterday (March 6) commented: “Due to his inexperience in monetary policy, the market is drawing on Diokno’s fiscal policies to determine the governor’s potential monetary policy stance".

During the period of rampant inflation in the Philippines last year, Diokno said in a Bloomberg interview that “structural reforms can’t be deserted for a transitory problem” and that “6.4% inflation was nothing out of the ordinary”.

According to his profile on the Development Academy of the Philippines, among Diokno’s goals as budget secretary under Duterte was to “pursue an expansionary fiscal policy to finance investments in human capital development and public infrastructure’’.

The Bankers Association of the Philippines (BAP) welcomed his appointment. It described Diokno as “a respected economist, academic, and civil servant” who “spearheaded various budget and governance reforms which improved the efficiency of the delivery of government services in the country.

“The BAP is optimistic that the reformist brand of leadership of the new BSP governor will pave the way in continuing the necessary reforms and policies to strengthen the Philippine banking industry,” the association said in a statement.

The OCBC Bank assessment, however, was less sanguine. It pointed out that some of Diokno’s previous comments suggest that he “is pro-Keynesian and pro-growth” and therefore “more tolerant towards higher inflation numbers… giving the impression that Diokno may turn out to be a dove’’.

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