But could deteriorate further this yr – analyst
THE Philippines’ gross international reserves (GIR) grew a slight 0.43 percent in January, recovering from a fall to their lowest level in 10 months at the close of 2016, official data showed on Tuesday.
However, an analyst warned the GIR level could deteriorate again this year under greater pressure against the current account surplus and the expected hikes in US interest rates.
As of January, the GIR stood at $81.04 billion, up by 0.43 percent both from the revised $80.691 billion in December and $80.692 in January 2016, the Bangko Sentral ng Pilipinas (BSP) said.
The foreign reserves level closed 2016 at the lowest level in 10 months, or since posting $81.87 billion in February 2016.
IHS Markit senior economist Rajiv Biswas said the current account surplus that the Philippines has maintained since 2003 is likely to come under pressure.
“During 2017, the impact of the recent peso depreciation, higher oil prices, as well as strong domestic demand, are expected to boost the import bill and further erode the current account position, with the surplus having already narrowed significantly in 2016,” he said.
The Federal Reserve is expected to hike interest rates three more times this year, prompting further capital outflows from emerging markets, including the Philippines, as funds shift to dollar-denominated assets, Biswas noted.
“The combination of these factors could result in some deterioration in the Philippines FX reserves position by the end of 2017,” he said.
The GIR is the sum of a country’s transactions with the rest of the world and is composed of the reserve position with the International Monetary Fund, foreign exchange holdings, gold reserves, special drawing rights (SDRs) and foreign investments.
The foreign reserves in January were enough to cover 9.2 months worth of imports, steady from December’s cover, but below the 9.8 months cover the year-earlier period, the central bank said.
The GIR in January was boosted mainly by “inflows arising from net foreign currency deposits by the national government, revaluation adjustments on the BSP’s gold holdings resulting from the increase in the price of gold on the international market, and its income from investment abroad,” it said.
The inflows were partially offset by payments made by the national government for maturing foreign exchange obligations and the BSP’s foreign exchange operations.
Pillars of strength
Nevertheless, Biswas said two major pillars of strength and stability for the Philippines balance of payments position are continued strong remittances from workers abroad, as well as export earnings and the increasing importance of information technology-business process outsourcing.
Measured against foreign debt, the January GIR is equivalent to 5.8 times the country’s short-term external debt due within one year and 4.1 times based on residual maturity, the BSP said.
Net international reserves–the difference between the BSP’s GIR and total short-term liabilities–rose to $81.04 billion from $80.69 billion.