RP HAS ENOUGH FOREX RESERVES - BSP
MANILA, DECEMBER 31, 2008 (STAR) By Des Ferriols - The country has enough foreign exchange reserves to cushion the economy from the impact of the expected slowdown in portfolio inflows from investments and exports.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the BSP has build up the country’s reserves to protect the economy from an expected slowdown in foreign exchange inflows from investments and exports in 2009.
“Reserves are built up precisely as insurance for rainy days,” Tetangco said.
This year, the country’s gross international reserve is projected to hit $36 billion, with the balance of payments (BOP) keeping a surplus of about $500 million.
Tetangco said, however, that the 2009 numbers are still being reviewed and the revised projections could not be released until early January when the latest data have been incorporated.
But according to Tetangco, he is comfortable with the country’s reserve levels. “It is difficult to predict the extent risk appetite will retreat from the market,” Tetangco said. “But as I said, our reserves continue to be at comfortable levels.”
“We also have buffers to slowing, even reversing, portfolio flows,” he added.
According to Tetangco, the BSP is expecting robust inflow of foreign exchange in the form of remittances from overseas Filipino workers and foreign exchange receipts from the growing business process outsourcing (BPO) sector.
Tetangco said the BSP is expecting the BPO sector to remain robust even during the present global economic condition.
“Also, as oil prices continue to decline, the country’s requirements for foreign exchange would correspondingly ease,” Tetangco said. “These are why I think that our external position will remain in surplus.”
Drained by high oil prices and investor pessimism leading to massive pull-out of foreign portfolio investments, the BSP had estimated that the country’s foreign exchange surplus will plummet to $500 million by the end of 2008.
The BSP’s revised 2008 forecast reflected a dramatic turn-around in market sentiments compared with the exuberance that propelled the balance of payments to a record $8.6-billion surplus in 2007.
The BSP had originally projected a BOP surplus of about $2.5 billion for 2008 but spiralling oil prices in the world market compelled the BSP to reconsider this projection which was later amended to a lower expected surplus of $1.5 billion.
With markets in turmoil and foreign funds gushing out of emerging markets, however, monetary officials said the actual surplus would be even lower, possibly no more than $500 million.
The BSP said the gross international reserve (GIR) is projected to hit $36 billion, a revision of the original projected total of $36.5 billion, mostly because exports would not grow as originally expected, creating a vast trade deficit because of rising import costs.
The BSP’s latest projections indicate that foreign exchange inflows from exports would reach $51 billion this year, only three percent up from the 2007 level.
On the other hand, imports are expected to reach $64.1 billion, up 11 percent compared with the import level in 2007. This would translate to a trade deficit of $13.1 billion this year.
Remittances from overseas Filipinos are expected to provide the one major source of uplift, with inflows expected to expand by 13 percent to $16.9 billion this year.
Earlier, BSP Deputy Governor Diwa Guinigundo said there is “reason to believe” that next year’s surplus would also be less than expected.
Based on the BSP’s August 2007 projections, the 2009 BOP position is projected to reach a surplus level of $2.3 billion. But Guinigundo said this would have to be revalidated.
“We need to go through the motion of validating our numbers and also checking the perception of the industries concerned,” Guinigundo said. “But given the worsening scenario, there are reasons to believe that this would moderate to a lower level of surplus.”
Chief News Editor: Sol Jose Vanzi
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