The Financial Stability Coordination Council (FSCC) noted in a new report that there are signs of economic recovery from the effects of the coronavirus disease 2019 (Covid-19) pandemic, but warned that market conditions are still fragile.

In the “1st Semester Financial Stability Report FSR)” released on Tuesday, FSCC Chairman and Bangko Sentral ng Pilipinas Governor Benjamin Diokno said, “The economy is heading in the right direction.”

He went on to remark that the financial market is liquid, and that despite supply-side pressures, inflation is stable. The labor force participation rate has risen to around 65 percent, employment has increased to 92.3 percent, and the percentage of people who are underemployed has dropped to 12.3 percent.

“The economy will revert to its growth path soon and the vaccine rollout is well underway,” Diokno underscored.

He further said that there is international convergence among financial stability authorities on what they’ve learnt from the Covid-19-induced global crisis and how managing systemic risks is vital to their immediate and long-term future.

Diokno underlined the importance of monitoring and pre-emptive thinking in the face of an uneven rate of recovery among jurisdictions.

“We are definitely better off today than a year ago. However, the ongoing recovery from old risks can generate a new set of potential risks. We need to continuously track these potential systemic risks, and act when warranted” he said.

“Many aspects of the future remain uncertain and with uncertainty, risk aversion in financial markets may not be too far behind.”

Meanwhile, the report notes that debt repayment is still the most serious threat. Because the pandemic has reduced expected incomes, the FSCC previously highlighted this issue, indicating that the balance between income and debt is today’s key negative risk.

The research also discussed how market circumstances in the education, retail, and commercial real estate sectors have changed.

“We make a conscious effort to look at industry-level issues as part of the effort to reduce uncertainties. We will look at other industries, but these three are important to our recovery and our future,” Diokno emphasized.

BY MEYNARD DELA CERNA