The Philippines remains “well-positioned” amid global volatility, the Bangko Sentral ng Pilipinas (BSP) said on Friday following the release of a report detailing cautiousness at the US Federal Reserve.
Minutes of the Federal Open Market Committee’s meeting last September showed that US policymakers had held off from raising interest rates given external factors.
Fed members noted that recent global and financial market developments, including a slowdown in China, could restrain US economic activity. Nevertheless, they viewed the risks as balanced and said that with appropriate policy accommodation, the economy would likely continue to expand at a moderate pace.
“This is an eventuality that is long anticipated by a large segment of the global financial markets,” central bank Deputy Governor Diwa Guinigundo said in a text message to reporters.
Guinigundo said the search for safe havens by foreign capital would likely lead to the Philippines seeing short-run volatility in the foreign exchange and equities markets.
“Those with large external exposure would be most concerned because of foreign exchange and credit risks,” he noted.
Still, Guinigundo said the Philippines would be supported by its strong growth prospects and ample external space courtesy of comfortable foreign reserves, a current account surplus and declining external debt-to-gross domestic product (GDP) ratios.
He also pointed out that domestic liquidity was continuing to support economic activity and fund-raising exercises.
“Investors should also realize that the other side of the Fed lift-off is not as dark: it means US growth is improving and with it, everybody is lifted up especially with respect to higher exports, services and investments,” Guinigundo said.
The country’s gross international reserves (GIR) rose slightly to $80.32 billion as of end-September.
The current account posted a surplus of $2.805 billion in the second quarter of 2015, equivalent to 3.8 percent of GDP, while the debt-to-GDP ratio improved to 45.4 percent in 2014 from 49.2 percent in 2013.
Domestic liquidity as measured by M3 expanded by 9 percent in August, growing faster than the revised 8.4 percent rate recorded in July.
The government, which has a 7 percent to 8 percent growth target this year, has cut its expectations to 6 percent.