Forex reserves up in December

MANILA, Philippines – The country’s foreign exchange reserves expanded by $440 million to $80.61 in December from $80.17 billion in November, data released by the Bangko Sentral ng Pilipinas (BSP) showed.

BSP Governor Amando Tetangco said the increase last month was due mainly to the national government’s net foreign currency deposits, as well as the BSP’s foreign exchange operations and income from investments abroad.

Income from investments abroad went up 1.4 percent to $71.72 billion in December from $70.75 billion in November.

Tetangco said inflows were partially offset by payments made by the national government for its maturing foreign exchange obligations.

Tetangco said the end-December gross international reserves (GIR) level remains ample as it can cover 10.3 months’ worth of imports of goods and payments of services and income.

The GIR is the sum of all foreign exchange flowing into the country. The reserves serve as buffer to ensure the Philippines would not run out of foreign exchange that it could use to pay for imported goods and services, or maturing obligations in case of external shocks.

If it deems necessary, the BSP buys dollars from the foreign exchange market to prevent sharp depreciation of the peso. It can also sell to avoid sharp appreciation of the local currency.

Tetangco said the GIR level was also equivalent to 5.5 times the country’s short-term external debt based on original maturity and four times based on residual maturity.

Last month, the central bank lowered its GIR level forecast for 2015 to $80.7 billion from the original target of $81.6 billion.

For this year, the BSP sees the GIR hitting $82.7 billion equivalent to nine months worth of imports.

The BSP now expects cash remittances from Filipinos abroad growing by four percent instead of the original projection of five percent for 2015 and 2016.

It expects the current account surplus to reach $5.7 billion this year, lower than the projected level of $8.9 billion in 2015 due mainly to the expected large increase in the imports of goods, notwithstanding improvements in the services and secondary income accounts.