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By Maricel E. Burgonio, Reporter
THE Philippines’ foreign exchange reserves are
sufficient to cope with unfavorable global economic conditions, the
organization of the world’s leading financial institutions said.
In its regional overview, Institute of
International Finance (IIF) said the country is projected to
increase its reserves to $37.1 billion this year from $32 billion
last year. Despite the higher forex reserves level year on year, the
Philippines would still account for the lowest share of emerging
economies’ combined buffer of $3.026 trillion this year from
$2.363 trillion last year.
Other Asian countries like Indonesia and
Thailand are expected to post reserves of $72.2 billion and $114.4
billion, respectively. Korea is expected to generate $282.5 billion
and Malaysia, $113.3 billion.
China will have the biggest buffer at $2.048
trillion while India’s would reach $358.4 billion, the IIF said.
“The massive holdings of official foreign
exchange reserves and solid macroeconomic fundamentals provide
considerable policy latitude for governments to cope and adjust to
unpredictable and unfavorable developments [at] home and abroad,”
IIF said.
The Philippines’ gross international reserves
(GIR) rose to $36.5 billion at end-March. This was more than $200
million higher than the reserves level in the previous month. The
Bangko Sentral ng Pilipinas (BSP) said its net forex operations and
income from investments abroad were responsible for the increase.
These inflows were partly offset, however, by
payments of maturing foreign exchange obligations of both the
national government and the BSP.
Despite the country’s lower reserves compared
with other emerging Asian economies, the current GIR level could
adequately cover 6.2 months of imports of goods and payments of
services and income.
A rising reserve level helps temper consumer
price increases, as the increasing amount of foreign exchange boosts
the peso’s value, thus pulling down the cost of imported goods.
Stronger reserves however may also be inflationary, as the surge in
foreign exchange inflows increases domestic liquidity or the money
supply.
The IIF suggested that emerging economies
sustain strong growth over the long run to make their economies
responsive and flexible to changing global conditions.
The impact of the US slowdown on emerging
economies is likely to be small, IIF said.
It estimated a percentage-point annual change in
US real gross domestic product (GDP) growth would alter expansion in
the region by 0.1 percent to 0.3 percent.
IIF said most of the leading emerging economies
in Asia have the ability to guard against an adverse impact of a
more pronounced weakening in the US economy by taking counter
cyclical fiscal measures.
For its part, the Philippines said it would
raise spending this year to cushion the country from a US recession.
The improvement in the country’s public
finances allowed the government to achieve its objective of lowering
its dependence on the international capital market.
New sovereign bond issues fell from $2.9 billion
in 2006 to $1 billion this year.
The country’s economy had benefited from the
reduction in the budget deficit, allowing the Philippines’ GDP to
grow 7.3 percent, a three-decade record, from 5.4 percent in 2006.
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