BSP official: 2011 foreign reserves to grow slower

Influenced by the weak economic recovery in advanced economies including the US and European countries, the Philippines’ gross international reserves (GIR) would expand at a slower pace next year, according to a central bank official. "Definitely it’s not going to be as [wide] as what we saw in 2010, but I think 2011 will continue to be a strong year for the external payments position although not as much as or not as strong as 2010, Bangko Sentral ng Pilipinas Deputy Gov. Diwa Guinigundo told reporters in an interview. “The reason for this of course is that the US as well as the other advanced economies in Europe continued to show weak growth performance," he stressed. International reserves constitute the sum of all foreign exchange flowing into the country, and the BSP sees the GIR at $58 billion next year. The country's GIR widened nearly 38 percent to a new record high of $61.303 billion in November from $44.17 billion in the same period last year, breaching the revised $60- billion target set by monetary authorities, latest data from the central bank showed. The increase was traced to higher borrowings by the national government to finance the country's swelling budget deficit, as well as higher earnings of the BSP from its foreign exchange operations, overseas investments, and gold holdings. The reserves as of end-November could cover 10.7 months worth of import of goods and payments of services and income. The amount was also sufficient to cover 11.2 times the country's short-term external debt based on original maturity and six times based on residual maturity. Impact on exports, remittances Guinigundo said the slow growth in the US and other advanced economies in Europe would likely impact on the country's external payments position as export earnings and remittances from Filipinos abroad drop. "And for us, from the perspective of the Philippines , what will be affected of course is the external payments position — exports and the demand for Filipino labor. But if we go by our past experience not withstanding the global financial crisis in 2007 up to 2009, we managed to show a very respectable if not a very impressive performance," he said. On the other hand, the country's balance of payments (BOP) surplus surged to a record $13.17 billion in the first 11 months of the year as capital continued to flow into the Philippines. The BOP surplus as of end-November was $7.972 billion more than the $5.206 billion booked as of end-November last year. For the month of November alone, the country posted a surplus of $3.9 billion, which was a complete reversal of the BOP deficit of $93 million in the same month last year. The BOP is the difference between foreign exchange inflows and outflows in a particular period, reflecting the country’s business transactions with the rest of the world. The BSP sees the BOP surplus easing to $1.9 billion next year. The January-November payments surplus already surpassed the $8.2-billion forecast that was revised from the $3.7-billion target. Originally, the BSP expected the BOP surplus to hit $3.2 billion this year but this was breached as early as June. The payments surplus surged to $6.421 billion in 2009. Adjusting 2011 targets The money sent home by overseas Filipino workers (OFWs) hit a new monthly record of $1.673 billion in October, largely on the seasonal rise in remittances for the Christmas holidays and with more OFWs deployed abroad, the central bank said in a report on Dec. 15. The remittance numbers in October brought the OFW remittances to $15.456 billion in the first 10 months of the year, up 7.9 percent from $14.23 billion in the same period last year. Guinigundo said monetary authorities are now reviewing the country's external payments position targets for next year to take into consideration the sharp increases registered so far this year. "We are still running our numbers because we have to adjust our targets for 2011 although the increase is not going to be as high as this year. We did not expect the improvement to be that strong this year," he said. — VS, GMANews.TV