PH foreign exchange reserves up in December

MANILA, Philippines – Following a slump in November, the country’s foreign exchange reserves bounced back in December, the Bangko Sentral ng Pilipinas (BSP) reported Thursday, January 7.

BSP Governor Amando Tetangco Jr said the country’s gross international reserves (GIR) – the sum of all foreign exchange flowing into the country – increased by $440 million to hit $80.61 in December from $80.17 billion in November.
 
The country’s foreign exchange reserves thinned in November after hitting its highest level since December 2013 in October 2015 at $81.09 billion.

GIR serve as buffer to ensure the country would not run of foreign exchange that could be used to pay for imported goods and services, or maturing obligations in case of external shocks. If necessary, the central bank can also buy dollars from the foreign exchange market to prevent the peso’s sharp depreciation. BSP can also sell to avoid sharp appreciation of the local currency.
 
Contributors

Last month’s increase was mainly due to the national government’s net foreign currency deposits, as well as the BSP’s foreign exchange operations and its income from investments abroad, Tetangco said.
 
Income from investments abroad inched up by 1.4% to $71.72 billion in December from $70.75 billion in November.
 
Inflows were also partially offset by payments made by the national government for its maturing foreign exchange obligations.
 
Targets

The end-December GIR level remains ample as it can cover 10.3 months’ worth of imports of goods and payments of services and income, BSP said. The GIR level was also equivalent to 5.5 times the country’s short-term external debt based on original maturity and 4 times based on residual maturity.
 
In December, the central bank lowered its GIR level forecast for 2015 to $80.7 billion instead of the $81.6 billion projected in May last year.
 
For 2016, the BSP sees the GIR hitting $82.7 billion, equivalent to 9 months import cover.
 
The BSP also lowers its target of cash remittances from Filipinos abroad to 4% instead of the original projection of 5% for 2015 and 2016.
 
The central bank expects the current account surplus of $5.7 billion this year, lower than the projected level of $8.9 billion in 2015 mainly due to the expected large increase in the imports of goods, notwithstanding improvements in the services and secondary income accounts.

The country’s external current account remained in surplus, and improvements in external payments dynamics also served to help shield the economy and the domestic financial markets from financial market volatility.
 
“In the presence of mounting external shocks, keeping one’s own house in order by sustaining strong macroeconomic fundamental serves as our first line of defense,” Tetangco earlier said. – Rappler.com