BSP sees slower growth in forex reserves

MANILA, Philippines - Monetary authorities believe that the growth in the country’s gross international reserves (GIR) would slow down next year due to the weak economic recovery being experienced by advanced economies, including the US and Europe.

Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said in an interview with reporters that the growth of the GIR next year would not be as fast as the growth experienced this year as foreign capital continued to flow into emerging market economies, including the Philippines.

“Definitely it’s not going to be as high as what we saw in 2010 but I think 2011 will continue to be a strong year for the external payments position although not as much as or not as strong as 2010. The reason for this of course is that the US as well as the other advanced economies in Europe continue to show weak growth performance,” Guinigundo stressed.

The GIR is the sum of all foreign exchange flowing into the country. The BSP sees the country’s GIR hitting $58 billion next year.

Latest data from the central bank showed that the country’s GIR jumped close to 38 percent to hit a new record high of $61.303 billion last November from $44.17 billion in the same period last year breaching the revised $60-billion target set by monetary authorities. The increase was traced to robust foreign exchange inflows from higher borrowings by the National Government (NG) to finance the country’s swelling budget deficit as well as higher earnings of the BSP from its foreign exchange operations, overseas investments, and gold holdings.

The reserves has grown to a level that could cover 10.7 months worth of import of goods and payments of services and income. The GIR as of end-November is also sufficient to cover 11.2 times the country’s short term external debt based on original maturity and six times based on residual maturity.

He pointed out that the slow growth in the US and other advanced economies in Europe would likely take its toll on the country’s external payments position due to lower export earnings and remittances from Filipinos abroad.

“And for us, from the perspective of the Philippines, what will be affected of course is the external payments position — exports and the demand for Filipino labor. But if we go by our past experience not withstanding the global financial crisis in 2007 up to 2009 we managed to show a very respectable if not a very impressive performance,” he said.

On the other hand, the country’s balance of payments (BOP) surplus surged to hit an all-time high of $13.17 billion in the first 11 months of the year on the back of the surge in the capital inflows to the Philippines. The BOP surplus as of end-November this year was $7.972 billion more than the $5.206 billion booked as of end-November last year.