Sustained dollar inflows seen
The Philippines is expected to continue enjoying a substantial inflow of dollars, with the balance of payments (BOP) seen staying in a surplus at least for the next three years.
According to the Bangko Sentral ng Pilipinas, the country’s export earnings were seen to improve and remittances were likely to grow further through 2016.
Moreover, tourism and foreign investments in peso-denominated securities and in the business process outsourcing (BPO) sector were forecast to fuel foreign-exchange inflows to the country.
“Dollars from exports and remittances will continue to come in, and the BOP will continue to post surpluses,” BSP Deputy Governor Diwa Guinigundo said Wednesday when asked about the central bank’s outlook for this year up to 2016.
With the significant dollar inflows the country is expected to corner over the next few years, Guinigundo said there was reason to believe that the peso would continue to appreciate. In 2012, exports managed to grow, albeit slower than the 10-percent target, despite the anemic growth of key export markets like the United States and the eurozone. Merchandise exports grew by 7.6 percent to nearly $52 billion from $48 billion in 2011.
Remittances last year were estimated to have grown year on year by 5 percent to $21.1 billion.
Growth in exports despite the weakness of the global economy was credited partly to a diversification of markets. Filipino exporters are gradually tapping buyerss outside the United States and Europe, particularly neighboring countries in Asia.
The increase in remittances was attributed to the healthy demand for Filipino workers from alternative labor markets such as those in Asia and the Middle East.
With the dollar inflows in the form of remittances and export revenues, together with foreign portfolio investments and foreign investments in the BPO sector, the Philippines continued to post a BOP surplus of $9.24 billion in 2012, although this was lower than the $10.18-billion surplus in 2011.
The BOP, a record of the country’s commercial transactions with the rest of the world, shows the inflow and outflow of dollars and other foreign exchange to and from the country. A surplus causes a buildup in the gross international reserves (GIR), which is the country’s total reserve of foreign exchange. The GIR stood at a record high $84 billion as of the end of 2012.
Guinigundo said the BSP saw no signs so far that the positive momentum for dollar inflows would be reversed.
Given the positive outlook on the Philippine economy, the BSP sees foreign portfolio investments and foreign investments in the BPO sector to rise further over the medium term.