Friday, 8 April 2011

GIR climbs to record $66.2 billion in Q1

Manila Bulletin

MANILA, Philippines – The country’s foreign exchange reserves surged to record high of $66.19 billion at the end of the first quarter, up $20.6 billion compared to the same period in 2010 and $2.3 billion from February, according to the latest Bangko Sentral ng Pilipinas (BSP) data on gross international reserves (GIR).

BSP Governor Amando M. Tetangco Jr. earlier projected that GIR will likely hit $70 billion by end-2011, fueled by remittances, exports and other external inflows.

The BSP projection is more conservative than the International Monetary Fund’s forecast of $78.4 billion GIR this year and $93.4 billion in 2012. The IMF also said the Philippines’ reserves level is at ‘comfortable position’ and comparable with regional peers -- Thailand, Indonesia and Malaysia.

Of $66.19 billion GIR, about $57.19 billion are BSP’s foreign investments and $7/08 billion are gold holdings, and both are significantly higher compared to previous data of $55.19 billion and $6.97 billion, respectively. In March, the BSP also recorded higher FX gains from FX transactions at $418.29 million from February’s $309.76 million.

BSP said the current level is enough to cover 10.2 months worth of imports of good and payments of services and income. It is also equivalent to 10.5 times the country’s short-term external debt based on original maturity and 5.9 times based on residual maturity.

In the meantime the IMF said the BSP has so far been successful in balancing exchange rate appreciation and reserve accumulation.

Reserves had provided an important buffer during the crisis, the report said, with the BSP's eye always on reserve adequacy and the costs of reserve accumulation. "(However) particularly in a volatile external environment, (BSP/authorities) would be reluctant to conclude too quickly that reserves were at adequate levels. Moreover, if a significant component of the inflows were transitory and driven by cyclical factors, then it was appropriate to smooth the impact on the exchange rate," said the IMF. "At the same time, (the BSP) were looking for ways to increase the absorptive capacity of the economy and harness capital flows to support investment and potential growth."

The IMF's 2010 Staff Report that includes projections for the next five years sees the Philippine current account balance still healthy at $9 billion this year, and capital and financial account of $6.3 billion -- both lower than what was projected in 2010. The expected remittances of $18 billion is also lower than the BSP's $20 billion forecast for fund transfers.

The IMF is inclined to mirror BSP's balance of payments projection of $6 billion to $8 billion this year although with a more conservative outlook. As for the country's foreign direct investments and foreign portfolio investments, the numbers are still on the steady side at $2 billion and $3.7 billion, respectively. The actual 2010 figures were $1.7 billion for FDIs and $4.6 billion for foreign portfolio "hot money."

The BSP is still reviewing FDI, hot money and current account projections for this year. The BOP numbers and its composition will be revised higher to reflect current domestic and global growth projections and its impact on trade and capital flows. Last year the BOP surplus amounted to $14.4 billion while GIR reached $62.4 billion and have increased to $64 billion by the end of February.

The IMF report said the surplus has reflected strong exports, remittances, sovereign bond issuance, and other capital inflows.

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