The Philippines is beginning to shed its image as “Asia’s Stray Cat,” as it is now joining the rest of the pack of Asia’s emerging tiger economies, a Bangko Sentral ng Pilipinas (BSP) official said.
“This cat is beginning to let the world hear its mighty roar,” BSP Deputy Governor Diwa Guinigundo said in a forum titled “Bloomberg’s Quantitative Easing and Currency Volatility—What’s Next for Asean?”
Asean is the Association of Southeast Asian Nations. Guinigundo said that the country’s advantage over the other emerging markets is its solid economic fundamentals.
He cited the country’s robust gross domestic product (GDP), which grew 7.5 percent for the second quarter, and the manageable inflation that is within the government’s 3-percent to 5-percent target.
“We call this sweet convergence of high growth and low inflation. To a large extent, this was on account of the expansion in the country’s potential capacity,” Guinigundo said.
The BSP official also noted that the Philippines posted a balance of payments surplus of $1.5 billion in the first quarter, and the country’s total reserves reached $82.9 billion as of end-July, which is equivalent to a year’s worth of imports of goods and payments of services and income.
“This shows that the Philippines possesses sufficient reserves ride out any turbulent period that we may encounter,” he said.
Furthermore, Guinigundo mentioned that “the country’s stable banking system is as sound as the banking sector is growing steadily and thus, creating a firm base for domestic retail funding.”
He also assured that the system is amply capitalized and there is enough liquidity in the market.
“This strength of the banking sector encourage the BSP to be confident that the country will have no difficulty form the early adoption of the capital requirements of the Basel III by January 2014,” Guinigundo said.
The BSP deputy governor also said that it is important for the Philippines and the rest of Asean to be cautious of the challenges the expected unwinding of the United States Federal Reserve’s quantitative easing (QE) program and the three-speed global growth may post.
“The anticipated Fed exit from its QE program would tighten the United States’ monetary conditions that will spur the repricing of assets and rebalancing of portfolios, which may result in the outflow of capital from emerging market economies—now under siege form threats of flow reversals,” Guinigundo explained.
Meanwhile, he added that global growth is still on “three speeds but slower,” noting that the economic developments in Asia, US and the eurozone.
“These are global developments that we must carefully monitor—in particular, if the US and eurozone can sustain their respective growth paths and subsequent recoveries,” Guinigundo said.
He warned that if not managed carefully, the said risks may undermine the region’s financial and economic stability that it is presently enjoying.
Amid the risks and challenges, Guinigundo assured that the BSP remains committed to maintaining good communication with the financial markets.