December 29, 2008
MANILA, Philippines-The Bangko Sentral ng Pilipinas said the country had ample foreign exchange reserves to replenish the projected portfolio outflows next year.
The lower prices of oil in the world market were also seen as another factor for the country’s reserves to remain in the surplus.
BSP governor Amando Tetangco said the BSP has enough reserves to serve as a buffer from the expected slowdown in foreign exchange inflows from investments and exports in 2009.
"Reserves are built up precisely as insurance for rainy days – and haven't you noticed, lately, it's been raining quite heavily," Tetangco said.
This year, the country’s gross international reserve was projected to hit $36 billion, with the balance of payments (BOP) keeping a surplus of about $500 million.
Tetangco added that he was comfortable with the country’s reserve levels.
"It is difficult to predict the extent risk appetite will retreat from the market," he said. "But as I said, our reserves continue to be at comfortable levels."
The BSP chief said the 2009 numbers have yet to be firmed up and may only be released in January.
"(But) we also have buffers to slowing, even reversing, portfolio flows," he added.
According to Tetangco, the BSP was 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 was expecting the BPO sector to remain steady despite the global financial turmoil.
"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 spiking oil prices in the world market earlier in the year 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) was projected to hit $36 billion, a revision of the original projected total of $36.5 billion, mainly owing to weak exports, creating a vast trade deficit because of rising import costs.
The BSP’s latest projections indicated that foreign exchange inflows from exports would reach $51 billion this year, only 3 percent up from the 2007 level.
On the other hand, imports were 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 were expected to provide the one major source of uplift, with inflows expected to expand by 13 percent this year to $16.9 billion.
BSP deputy governor Diwa Guinigundo earlier said there was “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 was projected to reach a surplus level of $2.3 billion. But Guinigundo said this would have to be reviewed.
This year, foreign portfolio investments were the first and the hardest to fall in the wake of the global financial crisis as investors dumped their holdings in emerging markets owing to fear of a global contagion.
The net outflow of portfolio investments soared to $911.68 million in the first 10 months of the year alone.