Thursday, 4 June 2009

What recession? Philippine forex reserves rose to $39.5B in May

By Michelle Remo
Philippine Daily Inquirer

MANILA, Philippines—The Philippines’ Gross International Reserves—a measure of a country’s ability to service obligations and engage in commercial transactions with the rest of the world—registered a new historic high in May, keeping the Philippines sufficiently liquid despite the lingering global economic crunch.

According to Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr., preliminary estimates by the BSP showed that the GIR further rose to $39.5 billion as of May, the month when overseas Filipinos usually send more remittances to their families to pay for their children’s tuition.

In April, Tetangco said the GIR stood at $39.3 billion, revised downward from the $39.5 billion reported earlier by the BSP.

Although some expect remittances to contract steeply this year because of job cuts in advanced economies, the BSP said alternative labor markets abroad have opened—such as Canada, Australia, Qatar—and Filipinos were highly demanded by foreign employers.

Contrary to most projections, the BSP expects total remittances this year to equal last year’s $16.4 billion. The BSP also noted that the increase in deployment of Filipino workers was still in the double-digit level, citing data from the labor department.

Tetangco said the gradual revival of market confidence in emerging economies like the Philippines was also helping increase the amount of foreign portfolio investments entering the country.

He said higher inflows of “hot money” would beef up the country’s balance of payments (BOP) and the GIR.

Tetangco said increasing inflow of investments in securities and equities to the Philippines was partly a reason the peso has strengthened somewhat in May than the previous month. After hovering mostly in the 48 level, the peso moved into the 47-to-a-dollar territory last month.

Developing nations like the Philippines have been urged to tap the international credit market to borrow and support their BOP and GIR as the lingering global turmoil is seen creating pressure on their liquidity positions.

The BSP, however, said the Philippines need not borrow for BOP and GIR purposes as of the moment, noting that the country’s foreign exchange liquidity was still relatively healthy.

The GIR in May is estimated to cover at least six months’ worth of imports.

Although the GIR was rising steadily, the BSP has set a conservative forecast that it would settle at $37.5 billion by the end of 2009, the same as that in end-2008.

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