Economy can deal with external shocks

MANILA, Philippines - Malacañang is confident the Philippine economy can withstand external shocks, with its sound macroeconomic fundamentals and “enough fiscal space” to address exchange rate volatilities and other effects of China’s currency devaluation.

The Philippine stock market suffered heavily on Monday amid widespread selloff due to lingering concerns over the Chinese economy and the yuan devaluation.

The peso also bore the brunt of the market fall, hitting a five-year low against the dollar to close at 46.83.

Quoting the Department of Finance, Presidential Communications Operations Office Secretary Herminio Coloma Jr. said “the country’s strong macroeconomic fundamentals and market-driven framework buoy the nation” and that “the market maximized the Philippines’ sound economic environment and deep-seated improvements in the last five years, which is now protecting the economy from external shocks.”

Coloma said these external developments were beyond the government’s control, but he explained the economy had “sufficient cash” and “fiscal space” to deal with their effects on the local economy.

“We are not borrowing huge amounts. The interest rates imposed on our short-term borrowings are lower so that is advantageous to us,” he said.

“We have enough fiscal space. We have enough financial strength and resiliency... and that according to Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., the BSP shall carefully provide liquidity to the market should the exchange rate volatilities become excessive,” he said.

And the BSP, at this time, is of the view that there is no need for aggressive intervention despite the peso fall, Coloma said.

“These things are called ‘market-driven.’ There is a natural law on supply and demand that becomes a dynamic in the exchange of peso to dollar and other currencies,” Coloma said.