PESO DROPS TO 11-MONTH LOW: SLUMP 'HEALTHY' / WORLD BANK: EQUITABLE GROWTH NEXT STEP
MANILA, JUNE 3, 2013 (PHILSTAR) By Prinz Magtulis - The peso sank to its weakest level versus the greenback in 11 months on Wednesday, dropping the second fastest pace this year which the Bangko Sentral ng Pilipinas (BSP) still considers “healthy.”
The local unit closed at 42.44 to a dollar, plummeting 49 centavos from Tuesday’s close of 41.95. This was the first time the currency ended trading at the 42-level this year.
This was the weakest close since June 26, 2012 when it hit 42.47, and marked the second worst drop for the currency, Asia’s second best-performer last year, after losing 51.5 centavos on Thursday last week.
The central bank and an analyst both attributed the slump to brightening growth prospects in the United States, the world’s largest economy, where consumer confidence rose to a five-year high of 76.2 in May.
Investors flocked the dollar, the world’s reserve currency, after the news, shunning away regional currencies such as the peso. Dollars traded amounted to $1.057 billion, higher than the previous day’s $879.90 million.
“Daily movements in the peso exchange rate similar to what we saw (yesterday) should not be unexpected, especially given the US dollar strength overnight,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.
“The movements have so far not been misaligned…This is still healthy and should not be a cause of concern,” he added.
The government has set a P42-P45:$1 assumption in the budget.
Jonathan Ravelas, chief market strategist at BDO Unibank Inc., reiterated that a US recovery would continue to hit peso this year, adding that a “weaker peso is actually good” for the country.
According to central bank data, the peso appreciated by 6.8 percent versus the dollar last year. As of Wednesday, the unit was down 3.39 percent since its close of 41.05 last Dec. 28, 2012.
“A weaker peso actually benefits the families of overseas Filipino workers as well as the BPO (business process outsourcing) industry. Eventually, it should be good for consumption spending,” Ravelas said by phone.
A weak peso adds value to remittances of overseas Filipinos as well as earnings of BPO workers. On the flipside though, it could risk inflationary pressures as imports become more expensive.
For Thursday, Ravelas said the peso could gain strength if the national income accounts data will be favorable. The data, which will show how fast the economy grew last quarter, is expected to show at least six-percent expansion.
“There could be some pullback at 41.80-42 level today,” he said. The peso ending the year at P43-level is also now possible.
World Bank: Equitable growth is next step (The Philippine Star) | Updated May 31, 2013 - 1:00am
WB Country Director Motoo Konishi talks to The STAR.
MANILA, Philippines - The World Bank (WB) hailed the Philippines’ better-than-expected 7.8 percent economic growth in the first quarter, with its country representative saying yesterday that the next step is to work for inclusive growth.
WB Country Director Motoo Konishi said the robust growth is “exciting” and indicated global confidence in what the Philippine government has been doing.
“I think it goes well with the next step, which is much more aggressive reforms that can be undertaken so that this whole growth can be shared equitably,” Konishi told The STAR shortly after news broke about the growth rate.
Konishi, who earlier said the country is poised to become Asia’s newest economic tiger, said the growth must be shared across the country and not just in Metro Manila.
He noted that this is what President Aquino’s administration has been espousing.
The growth rate, reported yesterday by the National Statistical Coordination Board, “shows the confidence that the business community has in the administration and the economy itself,” Konishi said.
He noted that the policy thrusts of the Aquino administration, with emphasis on transparency and good governance as well as commitment to improve the plight of the extremely poor, were similar to the tack pursued by the World Bank under its new president, Jim Yong Kim.
“It’s as if President Aquino’s social contract has become the World Bank mantra under (Jim),” Konishi said.
Asian Development Bank (ADB) Country Director Neeraj Jain lauded efforts by the government to make growth more inclusive.
“The current focus on job creation by crowding in private investment will help make economic growth more inclusive,” Jain said.
“As a key partner of the government, we will continue to support the government’s initiatives for inclusive growth,” he added.
“Increased and more efficient public spending had supported the economy, while strong remittance inflows and stable prices have continued to support robust private consumption,” Jain said. “This strong domestic demand has lifted the overall growth rate to a record high level.”
Standard Chartered Bank, for its part, said the impressive GDP results confirmed its bullish view on the Philippine economy.
However, it warned that the growth might have adverse inflationary impact if not properly handled.
“At present, inflation is a secondary concern. We believe that investment growth is likely to accelerate on the back of sustained corporate optimism and the imminent construction of more Public-Private Partnership infrastructure projects. The current account is likely to remain supported by remittance inflows and services exports,” Standard Chartered said.
It noted, however, that the benefits of economic growth didn’t appear to have reached the grassroots.
“GDP per capita grew 6.1 percent, although some rating agencies are concerned that the country’s wide income inequality hinders the pass-through of growth benefits to lower-income groups,” Standard Chartered said.
Services exports, meanwhile, performed below expectations, declining 2.1 percent year-on-year in the 1st quarter.
“We believe this was due to the high base effect, and still look for growth in services exports for the remainder of the year. We also expect net exports to improve gradually, in line with global economic growth, over the course of the year. For now, sustained remittance inflows should ease concerns about a contraction in the current account surplus,” it said.
Budget Secretary Florencio Abad said they expect private businesses “to intensify their investments further in the local market and become lead players in the Aquino administration’s growth agenda.” – Donnabelle Gatdula, Prinz Magtulis, Aurea Calica, Delon Porcalla
Philippines called 'brightest' in Southeast Asia By Camille Diola (philstar.com) | Updated May 29, 2013 - 12:15pm
Photo shows the Makati City skyline during sunset. ANDY ENERO
MANILA, Philippines - A report by the Institute of Chartered Accountants in England and Wales (ICAEW) said the Philippines is significantly contributing to the "glowing" Southeast Asian region with its bright economic prospects.
"The Philippines is the brightest spark in glowing Asean region," the report said, citing the recent quarterly review Economic Insight: South East Asia by its partner organization Cebr that highlights Indonesia, Malaysia, the Philippines, Singapore and Thailand.
ICAEW said that the "very positive" outlook for the country which is expected to grow 5.1 percent in GDP this year and in 2014 can be attributed to strong exports, "booming" household expenditures and the government's heavy infrastructure investments.
"The country looks set to shake off its former reputation as the ‘sick man of Asia’," Cebr's macroeconomics head Charles Davis said in a statement.
Davis said, however, that the country's capacity constraints will likely lead to a slowdown in growth, which is seen to fall to 4.5 percent in 2015. Such constraints cause higher inflation and tighter monetary policy.
Furthermore, the growth in stock prices in the Philippines--currently at 34 percent--is seen unsustainable and suggests a bubble to emerge, Davis warned.
“Stagnation in industrialized nations means investors are turning to emerging economies in search of higher yield,” Davis, also an economic advisor at ICAEW, said.
ICAEW South East Asia director Mark Billington, meanwhile, added that the Philippines' emergence in the region can be maintained through the management of its currently increasing credit levels taken on by firms and households.
"Debt levels in the region remain manageable for as long as the projected positive growth story remains. This is fine for now but would be a cause of concern if credit growth continues to outpace nominal GDP growth at the same rates we see today," Billington said.
Still, such scenarios are not as bleak compared to the country's larger prospects including its strong market investment matched with the higher credit levels, the report said.
“Growth outlook for both Philippines and ASEAN as a whole remains healthy. However careful judgment will be needed to ensure that credit growth and capital inflows are used to lay the foundation for future prosperity and not fuel a bubble,” Billington said.
The quarterly report provides the organization's 140,000 members with an overview of the region's economic performance.
Chief News Editor: Sol Jose Vanzi
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