The Bangko Sentral ng Pilipinas (BSP) said over the weekend that based on the emerging estimates for 2007 as approved by the Development Budget Coordinating Committee (DBCC), the 2007 GIR level is likely to be at least $500 million over the original projections made in November 2006.
According to BSP Governor Amando M. Tetangco Jr, the strong GIR in 2007 would also be boosted by the return of development program loans from official development assistance (ODA) sources such as the Asian Development Bank (ADB) and the World Bank (WB).
In 2007, remittances from overseas Filipino workers (OFWs) are expected to reach a record-high of $14.7 billion, up from $13.4 billion in 2006.
Export projections have not changed but foreign direct investments as well as foreign portfolio investments are expected to bring in more foreign exchange than expected this year.
As the peso continued to strengthen against the dollar, the BSP has also said that it would continue to build up its reserves this year, taking advantage of strong foreign exchange inflows and strong macro-economic fundamentals.
In 2006, the country’s GIR level stood at $23 billion.
"The BSP is taking the opportunity to further build up the country’s international reserves for self-insurance and confidence building," Tetangco said previously.
According to Tetangco, it was the right opportunity to build up the reserves considering the marked strengthening of macroeconomic fundamentals, including the sustained strong foreign exchange inflows from OFWs, exports, and inward foreign investments.
The BSP has projected net foreign direct investments (FDIs) to reach $2.119 billion in 2007, up from the $1.895 billion target for 2006.
Tetangco said investor interest in the country was gathering momentum in 2006 and this was expected to be sustained in 2007.
Strong foreign exchange inflows would keep the peso strong but Tetangco said the BSP would stick to its market-based exchange rate regime with some scope for occasional intervention to prevent sharp fluctuations and to maintain orderly conditions in the market.
"It should be mentioned, though, that in real effective terms, the peso has maintained broad competitiveness against its regional peers," Tetangco said.
On the other hand, Tetangco said the easing economic conditions would also make it easier for the financial system to shift in full gear to the Basel II capital adequacy framework in July this year.