Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco, Jr. deserved to be recognized as the “best central banker in the world,” said Tim Condon, the chief economist for Asia of ING Bank.

The BSP had shown that there is an alternative for dealing with hot money instead of heavy intervention in the foreign exchange and sterilization in the money market practiced in most of Asia.

“The BSP demonstrated last November that there’s a better way to run macro policy… with less intervention in the foreign exchange market. With short-term interest rates not hostage to an exchange rate target, the effectiveness of the central bank’s policy interest rate for controlling inflation would increase,” Condon said at the ING-sponsored semi-annual economic briefing in Makati City held Jan. 27.

While some of its counterparts risk resorting to capital controls to defend their exchange rates from hot money inflows, the BSP took a new tack: it did not roll over some of its maturing foreign-exchange currency swaps, said the economist. The resulting injection of money market liquidity pulled short-term interest rates lower, which halted the peso appreciation pressure. While some say this is a short-term cure, ING Bank’s country manager in the Philippines, Consuelo Garcia, said, “The swift action surprised local market players and was quite effective in calming the markets.”

Despite higher food and oil prices, Condon said he sees little inflation risk this year in the region, except for China. “There’s no evidence of inflationary pressure in the region outside of food. Core inflation or non-food inflation is historically low… Food is the problem but food price spikes fade. Monetary policy conditions in most Asian economies are not so loose that we need to fear the propagation of a food price spike to prices generally” he added.

With a prudent but flexible monetary policy, fiscal consolidation, high government credibility, a healthy banking sector, record-high gross international reserves, and external liquidity, the Philippine economy could easily grow by 5.3 percent in GDP, said Joey CuyegKeng, senior economist at ING Bank in Manila. The forecast is still on the “conservative” side, as it does not include accelerated spending for the Public-Private Partnership infrastructure program of the government.