BSP sees sustained buildup in forex buffer, BOP surplus

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) expects the country’s record-high foreign exchange buffer to sustain its buildup and the external payments position to strengthen amid the slump in global trade.

Zeno Abenoja, officer-in-charge of the central bank’s Monetary Policy Sub-Sector, said in a virtual press conference the BSP now sees gross international reserves (GIR) peaking at $105 billion instead of $100 billion this year.

He said the latest GIR forecast is equivalent to 11.6 months of imports,  taking into account revaluation adjustments and increased foreign loans by the national government in response to the pandemic as well as to fund recovery-supportive infrastructure.

The foreign exchange buffer already stood at an all-time high of $103.81 billion as of end-October, equivalent to 10.3 months of imports of goods and payments of services and primary income and about 9.3 times the short-term external debt.

The central bank has been building up its GIR to serve as buffer against external shocks. It is the sum of all foreign exchange flowing into the country and serves to ensure the country will not run out of foreign exchange it could use in case of crisis.

Abenoja said the central bank’s Monetary Board has also set a higher balance of payments (BOP) surplus of $12.8 billion or 3.4 percent of gross domestic product (GDP) instead of $8.1 billion or 2.2 percent of GDP this year.

He said the latest BOP assessment took into account the latest GDP growth forecasts for 2020 and 2021, the $10.3-billion surplus in end-October resulting from higher foreign borrowings by the national government and lower trade deficit as well as latest tourism receipts and business process outsourcing (BPO) revenues.

“Overall, the latest BOP assessment for 2020 reflects the apparent bottoming out of the COVID-19 impact in Q2. While recent external account figures remain below pre-pandemic trend and still in the negative territory, these are expected to improve from the first half of the year,” the BSP official said.