Friday, 20 February 2009

Philippine figures disprove IMF forecast

Jun Vallecera
Business Mirror

THE Bangko Sentral ng Pilipinas (BSP) on Thursday took comfort in the latest data on “hot money” flows, disproving an International Monetary Fund (IMF) view that the worst is not yet over in the case of foreign-portfolio fund outflows.

The BSP showed six-week data on Thursday where the net flow of hot or speculative foreign money was inward, totaling $231.07 million.

This was 3.5 times the year-ago inflows totaling only $66.52 million.

According to the BSP, gross inflows during the period reached $559.15 million, while gross outflows stood at $328.08 million.

A day earlier, IMF resident representative Dennis Botman told reporters the outlook on hot-money flows this year was bleak, as portfolio fund managers struggle to pull out placements in emerging markets like the Philippines and stay close to home.

But both BSP Governor Amando Tetangco Jr. and his deputy, Diwa Guinigundo, declared the worst was over as far as hot-money flows were concerned.

According to both of them, everything that could be pulled out of the country by way of hot-money placements has already been pulled out.

They made the declaration as the BSP reported hot-money outflows totaling $1.389 billion in 2008, a difficult year that would later force companies such as the US air-cargo carrier FedEx and chipmaker Intel Corp. to shut down operations and leave thousands jobless.

Botman believes the country’s external sector—as a result of difficulties and reverses such as the net outflow of portfolio funds he cited—should prove considerably weaker this year than last.

He earlier said the balance of payments, which tracks what is left of the country’s foreign exchange earnings after all its foreign-exchange expenses arising from trade, transfers and investments have been deducted, was to end in deficit of around $500 million.

The BSP had told reporters earlier the exact opposite, claiming the BOP should stay in surplus: as small as $500 million up to around $2 billion.

Botman acknowledged, however, that despite forecast strong headwinds affecting the external sector, the current-account component of the BOP should remain in surplus this year.

He also said the remittance of more or less 10 million overseas Filipinos should continue to expand, “although at a markedly slower rate.”

“Gross international reserves will be stable and the exchange rate is assessed to be broadly in equilibrium,” Botman added.

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