THE Philippines continues to rest on the benefits of sound macroeconomic fundamentals in the face of the debt crisis that has crippled Greece, according to officials who continue to downplay the economic headwinds that may arise from a possible crack in the European Union if Athens decides to leave the single-currency market.
They also continue to emphasize that their respective agencies are watchful of the headwinds that situation may bring upon the Philippine economy.
In an interview with reporters over the weekend, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said the developments in Greece have spurred volatilities in financial markets around the world.
The volatility has seeped into the forex market but not significant enough to weaken the peso, he said.
“In the case of the Philippine peso, there has also been a weakening but there was, at the same time, a subsequent recovery of the exchange rate,” Tetangco noted.
As such, the BSP chief believes that the Philippine macroeconomic fundamentals remains sound and continues serve as buffer against external shocks.
He ticked off such Philippine positive items as the sufficiency of international reserves, a safe and sound banking system, a favorable macroeconomic performance, and an inflation rate that remains within target.
“I think that we remain to be in a good position to whether these volatilities in the bond, equity and foreign exchange markets,” he said.
In terms of remittances, the Tetangco pointed out that while most Filipino seafarers are working in ships of Greek registry, the shipping lines are servicing not only Greece but also other countries. So, the impact on money transfers will not be significant enough to affect the flow of funds from overseas Filipino workers.
“We have also observed in a number of cases that while prospects for remittances may be affected in certain developments in specific counties, Filipinos have always found a way to find other jobs in neighboring countries within the same area or region. So, we don’t believe that it’s going to be significant in terms of the effect on remittances,” he said.
The central bank will continue to watch the developments unfolding in Greece and assess whether the impact on the Philippines is imminent.
“Right now, we see that the impact will most likely be in the form of contagion in the financial markets. That is why we continue to monitor how different markets are doing and how they are all responding or reacting to all these developments,” Tetangco said.
Meanwhile, Finance Secretary Cesar Purisima said the Philippines stands as a pillar of stability in the Southeast Asia with a sound fiscal position decoupled from any spillover effects from the Greek default.
“The Philippines is prepared to navigate through challenges from uncertainties brought about by external risks and factors. We continue to develop measures fortifying the economic fundamentals we have built, as well as increasing competitiveness in the country, reaping brighter prospects for higher and more durable growth,” he said.
Purisima noted the general government debt-to-gross domestic product ratio has consistently dropped from 68.1 percent in 2003 to 36.4 percent in 2014.
This fiscal space translates into more leeway for exercising commitment towards an expansionary fiscal policy, giving the government the ability to spend more on infrastructure, social services and other development initiatives to boost the economy, he said.
The Finance chief pointed out that the government is also exercising prudent policies on debt and liability management, including the preference for domestic debt over foreign borrowings and long-term loans over short-term maturities.
Espousing less reliance on external finance makes the country less susceptible to foreign exchange volatilities while long-term debts insulates the country from liquidity problems that short-term debts bring about, he added.
“While the Philippines stands in good stead to navigate the challenges, not only from Greece but emerging bouts of uncertainties, it is imperative to stay on the course of reform and maintain vigilance to put the country on a path of sustained, higher and inclusive growth.” Purisima said.