GROSS INTERNATIONAL RESERVES TO REACH $17 BILLION THIS YEAR
MANILA, April 25, 2005 (STAR) By Des Ferriols - With hot money flows expected to reach $4 billion this year, monetary officials said the country’s gross international reserves (GIR) could reach $17 billion this year and push the balance of payments (BOP) to surpass the projected $505-million surplus.
Based on the initial indications of its on-going review, the Bangko Sentral ng Pilipinas (BSP) said the surge in remittances from overseas Filipino workers combined with in flows from portfolio investments could push the GIR to as high as $17 billion this year, more than the $16-billion target.
BSP Deputy Governor Amando M. Tetangco told reporters over the weekend that portfolio investments alone could go up to as high as $4 billion this year, especially if the government succeeds at implementing its programmed reforms.
According to Tetangco, the increase in the number of deployed workers abroad would also add another boost to the GIR with remittances expected to grow by around 10 percent, faster than the six-percent growth originally projected for the year.
"We have to finalize our data but initially, we are seeing very good numbers, we think we can easily get an even higher BOP surplus this year," Tetangco said.
The BSP conducts a periodic review of its monetary targets and according to Tetangco, the on-going review took into considerations recent developments that might have changed the outlook on some fundamental numbers.
Tetangco said that with the expected increase in OFW remittances and inflows from foreign portfolio investors, the GIR could easily reach $17 billion, with the projected range likely to adjust to $15 billion to $17 billion rather than the original $14 billion to $16 billion.
Last year, the BSP projected a $505-million surplus for 2005 but this was later scaled down to $464 million. But Tetangco said it looked like the surplus is going to be better after all, possibly higher than $505 million.
"Even if oil prices are high and causing a drain on our reserves, we have off-setting inflows from OFW remittances, foreign portfolio investments and foreign direct investments," he said.
"If we succeed at rolling out all the reforms we have set out to accomplish, the numbers will look even better," Tetangco said.
In the first quarter alone, the BSP reported earlier that foreign portfolio investment transactions recorded a cumulative net foreign exchange inflow of $1.525 billion, about 17 times the $91.5 million posted during the same period in 2004 and over three times the $486.8 million net inflow for the whole of 2004.
On a gross basis, portfolio investments registered during the period totaled $2.293.8 million, or 3.8 times the figure registered in the same period last year. Meanwhile, withdrawals of foreign portfolio investments totaled $768.4 million, 50 percent more than last year’s $510.9 million.
According to Tetangco, being removed from the blacklist of the Financial Action Task Force (FATF) spurred portfolio investments that have been hesitant to come in despite the attraction of renewed activity in the Philippine stock market.
"If we can get the rest of our reforms off the ground, more investments will come in," Tetangco said. "Right now, the concern of the market is still the value-added tax and ultimately the fiscal balance."
Reported by: Sol Jose Vanzi
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