PH is prepared for Fed taper — IMF

MANILA, Philippines – The Philippines is prepared for the impact of the imminent tapering of the US Federal Reserve’s massive stimulus program, according to an International Monetary Fund (IMF) team.

Rachel van Elkan who led the IMF mission that visited Manila from September 17 to 20 cited the Philippines’ “strong fundamentals” in a report released September 24.

“As in other emerging markets following the announcement of prospective tapering of asset purchases by the U.S. Federal Reserve in late May, Philippine assets saw selling pressure that caused the peso to weaken and market interest rates to rise. Recent delay in the commencement of tapering led to some reversal of previous market developments,” she wrote.

“Nonetheless, when tapering does eventually begin, the Philippines’ strong fundamentals — including strong current account receipts, its net creditor status, steady reductions in public debt, and low foreign participation in government securities markets — position the economy to adjust smoothly to the accompanying capital flow reversal and slow down in regional growth,” she added.

She also cited the additional cushion a recent monetary move would provide for further growth. The Bangko Sentral ng Pilipinas (BSP) has created liquidity in the market after restricting access to the Special Deposit Account (SDA) window to unlock capital in the investment instrument and urge cash-rich banks to channel their capital toward productive activities.

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Liquidity and credit growth in the Philippines are rising in tandem with the economy. So far, officials say credits granted to the property market are not risky since there is no bubble.

The eventual reduction in US’s bond-buying scheme may result in higher borrowing costs. Yet, the BSP has kept its benchmark interest rate at record 3.5%. Inflation stayed at record low. – Rappler.com