Connect with us

Hi, what are you looking for?


Policy makers eye GDP-linked bonds

The government is hoping a pickup in consumer spending ahead of the holidays will help boost economic growth. — PHILIPPINE STAR/MICHAEL VARCAS

By Luz Wendy T. Noble, Reporter

THE Financial Stability Coordination Council (FSCC) is evaluating the possibility of issuing securities linked to the country’s gross domestic product (GDP) as a new instrument to manage liquidity in the financial system, FSCC Chairman and Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said.

“We continue to consider the prospects and timing of GDP-linked bonds (GLBs). But this has to also come hand in hand with the recent issuance of BSP securities and the evolving market conditions,” Mr. Diokno said in an e-mail to BusinessWorld.

“Our objective is to re-deploy liquidity that is already available in the market as part of our shared objective to address risk aversion and move further towards the New Economy,” he added.

In September, the BSP launched the 28-day BSP bills as part of its initiatives towards more market-based monetary operations.

Pressed for details, Mr. Diokno said the GDP-linked bonds, if issued, will have a longer tenor than the Treasury bills, by nature.

“The prospect of issuing GDP-linked bonds is under review, but there is no firm commitment for its adoption,” he said in a Viber message.

Analysts said the risks of such bonds lie on the volatility of the economy.

“GDP-linked bonds will be both an advantage and disadvantage depending on the volatility of GDP indicators which as of now are moving in the opposite direction (e.g. unemployment, foreign direct investments, inflation, etc.). This opposite movement may jeopardize the value of bond share,” Colegio de San Juan de Letran Graduate School Dean Emmanuel J. Lopez said in a text message.

Despite this, Mr. Lopez said such bond issuance could stimulate spending and investment, which could then create a “semblance of normality, at the same time, induce GDP growth.”

From an investors’ perspective, a faster pace of recovery will provide higher interest rate returns, said Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.

“Since the Philippine GDP growth (before the pandemic) had been one of the fastest-growing among relatively larger countries around the world, this would provide greater incentives for investors,” Mr. Ricafort said in a text message.

The economy shrank by 11.5% in the third quarter, bringing the nine-month GDP contraction to 10%. The government expects the GDP to slump by 8.5% to 9.5% this year.

In 2019, the country’s GDP rose by 6%.

Meanwhile, a softer economic bounceback will still be favorable from an issuer’s point of view, said Mr. Ricafort.

“[Such] conditions would allow lower borrowing costs for GDP-linked bonds, thereby providing greater support in terms of lower debt-servicing costs as the resulting savings may be re-allocated to pump-priming other support measures when needed most to resuscitate the economy,” he said.

Economic managers maintained its GDP growth outlook for 2021 at 6.5-7.5%, and for 2022 at 8-10%.

UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the GDP-linked bonds could be a welcome development if the government decides to push through with the issuance.

“If these were used in other countries, why not ours? The good thing here is that investment instruments are growing and varieties are expanding,” Mr. Asuncion said in a Viber message.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.
Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!



WASHINGTON D.C. — The United States is seeking to form a coalition of countries to drive negotiations on a global plastic pollution treaty, weeks...


By Diego Gabriel C. Robles  THE WORLD BANK (WB) upgraded its growth forecast for the Philippines for this year and 2023, citing an “accommodative”...


THE PHILIPPINE auto industry’s sales recovery will likely be derailed if a measure reimposing excise taxes on pickup trucks is signed into law, according...


THE BANGKO SENTRAL ng Pilipinas (BSP) may deliver a second off-cycle rate hike in early November when the US Federal Reserve is expected to...


THE ASIAN Development Bank (ADB) is planning to allocate at least $14 billion for a program aimed at easing a food crisis in the...


With the reversal of the 1.25% rise in National Insurance Contributions happening on the 6th of November, employers across the nation have an opportunity...

You May Also Like


Having a good Instagram marketing agency to back up your Instagram account is an absolute must going into the new year. With competition stronger...


The minute that any question pops into your head, you can simply ask Google. No longer do we have to pour over books and...


Insomnia is the most common sleep disorder in the global population. Therefore, it is a problem that many people suffer or have suffered throughout...


Ivermectin, an existing drug against parasites including head lice, has had a checkered history when it comes to treating COVID-19. The bulk of studies...

Disclaimer:, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2021 SmartRetirementReport. All Rights Reserved.