PH imports forecasts raised, exchange rate adjusted
Despite revisions, the growth target for 2014 is still attainable, the NEDA chief says

ADJUSTED. Pressure from imports prompted adjustment to the exchange rate from P41 to 44 to P42 to 45 for the year until 2016. File photo by AFP

MANILA, Philippines – Imports forecast was raised and exchange rate was adjusted, while growth projections and inflation targets were unchanged, the Development and Budget Coordinating Committee (DBCC) said Friday, June 20.

The revised imports targets was buoyed by expected reconstructions happening, new projects coming in, and investments going up, National Economic and Development Authority (NEDA) Director General and Socio-economic Planning Secretary Arsenio Balisacan said.

Imports forecast for the year was adjusted from 6% to 9%. For 2015, the 7% forecast was updated to 10% while the 2016 forecast of 9% was hiked to 12%.

As such, pressure from imports prompted Philippine economic managers to adjust the exchange rate from P41 to 44 to P42 to 45 for the year until 2016.

Export targets were retained at 6% for this year; 8% for 2015; and 10% for 2016.

The global economy is improving and the government expects it to continue, Balisacan said.

“This year’s growth target [is] still attainable. We expect consumption to be still bullish, government spending to speed up. [The] industry is expected to recover. Services will continue to grow faster,” Balisacan said.

On June 19, the Bangko Sentral ng Pilipinas (BSP) kept its interest rates steady, but hiked the rate on special deposits amid inflation pressures.

The Monetary Board maintained its interest rates at record lows of 3.5% for overnight borrowing and 5.5% for overnight lending, but raised the interest rate on the Special Deposit Account (SDA) facility by 25 basis points to 2.25% from 2% across all tenors effective immediately.

The BSP also changed its inflation forecasts, stating inflation was expected to settle at 4.4% this year, instead of its earlier projection of 4.3%. Inflation in 2015 would likely average 3.7%, versus the previous estimate of 3.4%.

$2B surplus for 1Q 2014

Revisions to the DBCC’s economic targets were made following the BSP report showing the country’s balance of payments (BOP) position hit a deficit of $4.5 billion in the first quarter of 2014, brought about by the net outflows in the financial account; a reversal of the $1.5 billion surplus recorded in the same quarter last year.

The BOP summarizes an economy’s transactions with the rest of the world for a specified time period.

The US Federal Reserve’s cutting of monetary stimulus made an impact on the net outflows. The monetary stimulus has contributed largely to capital flowing to the emerging markets like the Philippines.

The country ended the first quarter of 2014 with a $2 billion surplus, 13.2% higher than the $1.7 billion the same quarter in 2013.

Meanwhile, the current account continued to perform favorably during the quarter mainly due to the higher net receipts of secondary income, lower deficit in trade in goods, and the reversal of primary income to net receipts from net payments.

Outstanding external debt drops

BSP Governor Amando M. Tetangco Jr also reported that the country’s outstanding external debt approved/registered by the BSP stood at $58.3 billion at end-March 2014, down by $165 million or 0.3% from the $58.5 billion level at the close of 2013. 

Such resulted from net repayments mainly on liabilities of banks worth $833 million, which were partially offset by an increase in non-resident investments in Philippine debt papers issued offshore ($417 million); foreign exchange revaluation adjustments ($169 million) as the US dollar—the reporting currency for debt—weakened, particularly against the Japanese Yen; and adjustment to previous periods’ transactions ($81 million).

Compared to the same period last year, the debt stock also declined by $705 million or 1.2% from $59 million due to negative foreign exchange revaluation adjustments ($1.3 billion). 

Other factors that reduced the downward impact of the exchange revaluation on the debt level include: higher non-resident investments in Philippine debt papers ($412 million); net availments ($97 million); and adjustment to previous periods’ transactions ($93 million).

External debt refers to all types of borrowings by Philippine residents from non-residents that are approved/registered by the BSP.

Meanwhile, Bureau of the Treasury Deputy Treasurer Sharon Almanza said the bureau is open to reduce borrowing in the third quarter, lower than the borrowing for the current quarter.

Almanza said that borrowing mix for 2015 is still leaning to borrow more from the domestic market at 86% to 14% versus this year’s 85% to 15%.

Almanza added the bureau is open to some international issuance, but they will be limiting external financing, which will be sourced mostly from official development assistance (ODA). –

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