BSP hikes forex reserves, BOP surplus forecasts

The Bangko Sentral ng Pilipinas (BSP) raised its projections on the country's gross international reserves (GIR) and balance of payments (BOP) position as monetary officials bank on the upturn in global economic activity to spur local growth momentum. BSP Governor Amando Tetangco Jr. said in a text message that the country's GIR is expected to reach between $48 billion and $49 billion instead of the earlier projection of $47 billion to $48 billion while the BOP surplus is seen hitting $3.7 billion instead of $3.2 billion this year. "The projections are indicative of a stronger, more fortified external payments position, more capable of withstanding possible headwinds to domestic and global economic growth in the period ahead," Tetangco told reporters . Last year, the GIR jumped 17.8 percent to a new record high of $44.24 billion from $37.55 billion in 2008 due to strong inflows, government deposits, and the increasing value of the central bank’s gold holdings. The country's GIR hit a new record high of $46.16 billion as of end-March from $45.713 billion in February. "As a result of these developments, the country's GIR is expected to reach around $48 billion to $49 billion from the earlier projected $47 billion to $48 billion, providing a stronger buffer against external shocks," he added. GIR Initially, the BSP predicted the BOP position posting a surplus of between $3 billion and $4 billion this year from $5.3 billion last year on the back of strong inflows of overseas Filipino workers' (OFW) remittances, robust portfolio investments, and recovering export earnings. The BOP surplus, according to the latest data, fell by 20 percent to $1.363 billion in the first quarter from $1.732 billion in the same quarter last year. The BOP, which refers to the difference of foreign exchange inflows and outflows on a particular period, represents the country’s transactions with the rest of the world. "The revisions of the BOP projections were also due to the availability of the full-year 2009 numbers and are consistent with results of industry consultations," the BSP chief said. Tetangco also said monetary authorities now expect an improved current account position to $8.1 billion or 4.6 percent of gross domestic product (GDP) from $4.5 billion or 2.5 percent of GDP this year. "The revised projections are based on the BSP's expectations of global economic activity initially gaining lost ground and developing stronger growth momentum thereafter," he explained. According to the BSP governor, monetary authorities noted that the stronger activity across a broader base of economic growth drivers would provide higher-than-expected foriegn exchange earnings including OFW remittances, business process outsoucing, exports, and mining. The BSP now projects an eight percent rise in OFW remittances instead of six percent this year from a record $17.348 billion last year. The amount of money sent home by overseas Filipinos went up by 7.7 percent to $2.785 billion in the first two months of the year from $2.552 billion in the same period last year. The BSP sees foreign direct investment (FDI) inflows easing to about $1.8 billion this year after jumping by 26.2 percent to $1.95 billion last year from $1.54 billion in 2008 on the back of strong equity inflows as investors continued to plough back earnings to the country in recognition of the resilient domestic economy. As expected, FDI inflows plunged by 74 percent to $101 million at the start of the year from $393 million in January last year due to lower equity placements and higher withdrawals. The BSP's Monetary Board, according to Tetangco, comes up with projections for the current year's external payments position in October of the year before and in April of the current year. "For the april 2010 projections exercise, the BSP has upgraded its projections on the country's external payments position, relative to its forecast announced six months earlier in October 2009," he stressed. Tetangco also cited the improved foreign investor sentiment partly in reaction to the country's enhanced growth prospects while risk appetite for emerging market access further increase. The Cabinet-level Development Budget Coordination Committee (DBCC) sees the country's domestic output as measured by the GDP expanding between 2.6 percent and 3.6 percent this year. The Philippines escaped recession as its GDP eked out a 0.9 percent growth from a 3.8 percent expansion in 2008. Tetangco cited the decision of multilateral financial institutions led by the International Monetary Fund (IMF), World Bank (WB), Asian Development Bank (ADB), and others to upgrade the country's economic assumptions as part of the recent upgrades in their respective world economic outlook. The IMF upgraded the country's GDP growth outlook to 3.6 percent instead of 3.25 percent this year, the WB hiked the country's GDP expansion forecast to 3.5 percent from 3.15 percent while ADB jacked up its GDP growth projection to 3.9 percent from 3.3 percent. - GMANews.TV