MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) has slightly lowered the country’s external payments position targets for this year due to the spillovers of the sovereign debt crisis in Europe but is still confident that the Philippines would have enough buffer funds to survive the financial contagion.
BSP Governor Amando Tetangco Jr. said in his keynote address during the Philippine Financial Market Forum sponsored by The Asset Forum, the Philippine Stock Exchange, and the Financial Executives of the Philippines that the Monetary Board is now looking at lower targets for the country’s external payments position.
Tetangco said the BSP now sees the country’s gross international reserves (GIR) hitting a range of $77.5 billion to $78 billion instead of $79 billion this year and the balance of payments (BOP) surplus reaching $2.6 billion instead of $2.8 billion.
“The revisions took into account the latest figures, actual figures, the prospects for the future given the developments that are taking place in Europe as well as the US,” he stressed.
The BSP earlier reported that the GIR - the sum of all foreign exchange flowing into the country - posted a double-digit growth of 10.4 percent to $76.015 billion in end-May from $68.853 billion in end-May last year.
The end-May GIR level could cover 11.4 months worth of imports of goods and payments of services and income as well as 10.8 times the country’s short-term external debt based on original maturity and 6.6 times based on residual maturity.
The end-2011 GIR reached $75.302 billion and was lower than the revised full-year target of $76 billion. However, the country’s foreign exchange reserves hit a record high of $77.357 billion last January but have declined since then.
On the other hand, the BOP position - the difference of foreign exchange inflows and outflows on a particular period and represents the country’s transactions with the rest of the world - booked a surplus of $1.164 billion from January to April this year or 75 percent lower than last year’s $4.577 billion.
The country’s BOP surplus fell 28.8 percent to $10.179 billion last year from $14.308 billion in 2010 due to the sudden reversal of foreign capital inflows towards the end of the .
Tetangco said the BSP has decided to retain the five percent growth forecast for remittances from overseas Filipinos which is lower than the 7.2 percent growth recorded in 2011.
Likewise, he added that the country’s current account (CA) position is expected to continue to book a surplus as monetary authorities decided to retain the 10 percent growth in export earnings this year.
Latest BSP data showed that the current account surplus plunged 20 percent to $7.1 billion last year from $8.9 billion in 2010 as weak global demand pulled down the country’s merchandise export earnings .
The BSP chief said the developments in European countries as well as the US would continue to affect capital flows to emerging markets including the Philippines through lower foreign direct investments (FDIs) and foreign portfolio investments or hot money.