Compared to other emerging markets, the Philippines is in a better position to cope with market volatilities, a senior bank official said.
“There is really nothing in the minutes that the markets do not know yet. It is again the bond markets and the whole Emerging Asset class that are experiencing high level of volatility,” Tony Moncupa, EastWest Bank president and chief executive officer said, referring to the minutes of United States Federal Reserve July policy meeting.
Moncupa said the combination of investors’ anxiety on some emerging markets economic numbers and the expected withdrawal of the US Fed monetary stimulus are were against emerging markets.
“If this continues, interest rates, not only in the US but likewise in the emerging markets maybe adjusted upwards. The latter as a defense against deteriorating currencies,” he said.
Last week, Asian markets and currencies shrank as the Fed failed to provide clarity about the future of the $85-billion a month stimulus package known as quantitative easing (QE).
QE fuelled an investment splurge in emerging Asia over the past year.
“While arguably, the Philippines is in a better position than many emerging markets, I guess this is a case of low tide grounding most ships. But ships that are in better condition should re-float when the tide turns, as it would. In the meantime, it would seem that volatility will be with us,” he said.
Tim Condon, ING’s chief economist in Asia, said the Philippines “caught up” when the peso closed at 44 to a dollar on Thursday, its weakest in 30 months.
“Over the last month the peso has depreciated 2.09 percent, which is in the middle of the pack for Asian Foreign exchange. The Philippine Stock Exchange index has lost 8.8 percent in peso terms, again in the middle of the pack among Asian markets,”he said.
However, Condon said that the Philippines is less vulnerable to contagion than its Southeast Asian neighbors because it has a stronger external payments position.
The ING economist added that the remittances of overseas Filipino workers sustain a comfortable current account surplus and the trade deficit is narrowing, going down $444 million year-on-year in the first five months of the year.
Condon said the Philippines will not be the source of a balance of payments (BOP) crisis. Bangko Sentral ng Pilipinas data said that cumulative surplus from January to July 2013 reached $3.677 billion.
“However, if a BOP crisis breaks out elsewhere the Philippines won’t be spared contagion,” he said.
Mayvelin U. Caraballo