Forex reserves seen hitting record $75 B this year

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) sees the country’s gross international reserves (GIR) hitting a new record level of $74 billion to $75 billion this year as foreign capital continued to flood emerging market economies including the Philippines due to the economic uncertainties in advanced economies led by the US as well as the debt crisis in Europe.

BSP Governor Amando M. Tetangco Jr. said in an interview with reporters that the central bank expects higher foreign exchange reserves in light of the country’s balance of payments (BOP) surplus.

“Better BOP surplus in the first half that was substantially more than half of the whole year target,” Tetangco stressed.

The GIR is the sum of all foreign exchange flowing into the country while the BOP refers to the difference of foreign exchange inflows and outflows on a particular period and represents the country’s transactions with the rest of the world.

Originally, the BSP expected the GIR to hit between $63 billion and $64 billion this year but was raised to $68 billion to $70 billion last February.

However, the country’s GIR level stood at a revised figure of a new record level of $71.887 billion as of end-July breaching the $70 billion target.

On the other hand, the BSP sees the country’s BOP surplus hitting $6.7 billion from a record level of $14.4 billion last year due to robust remittances from overseas Filipino workers (OFWs), strong earnings from the business process outsourcing (BPO) sector, and higher tourism receipts.

Latest data showed that the BOP surplus surged 80 percent to $6.286 billion in the first seven months of the year from $3.438 billion in the same period last year on the back of the strong capital inflows into emerging market economies as well as strong exports, BPO, and tourism earnings.

OFW remittances climbed 6.3 percent to $9.635 billion in the first half of the year from $9.062 billion recorded in the same period last year. The amount of money sent home by Filipinos abroad to their loved ones in the Philippines hit a new monthly record level of $1.737 billion in June despite the political tensions in the Middle East and North African (MENA) region, the “Saudization” program of the government of Saudi Arabia as well as the debt crisis in Europe.

OFW remittances grew by 8.2 percent to a record level $18.76 billion last year from $17.35 billion in 2009 due to the continued demand for skilled Filipino workers abroad as well as the expansion of remittance centers abroad giving OFWs more options to send money to their loved ones in the Philippines.

Last April, the BSP lowered its OFW remittance growth forecast to seven percent or $20.1 billion instead of the original target of eight percent or $20.2 billion this year due to the tensions in the MENA region and the disasters in Japan.

Next year, it expects a slower growth of five percent or $21.2 billion.

The country’s strong external payments position, he explained, continued to provide the Philippines with comfortable buffers against possible external shocks and helped ensure our external debt sustainability.
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By: Lawrence Agcaoili
Source: The Philippine Star, Sept. 7, 2011
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