Strengthening US economy good for PH, says Bangko Sentral

The Philippines can expect increased investments and stronger remittance flows as the United States economy starts showing signs of recovery, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Deputy Governor Diwa C. Guinigundo said the schedule of the tapering of the US Federal Reserve’s quantitative easing program was still uncertain, what was sure was that the world’s largest economy was now on track to recovery.

“For us in the real sector and even in those in the financial sector side, this is positive. We will have bigger markets for exports and (overseas Filipino workers),” he said.

A stronger US economy would also mean more profitable American corporations that will have more resources to invest overseas.

Guinigundo said the Philippines, which was Asia’s fastest growing economy in the first quarter of the year, could expect more of these investments to come in.

“These are foreign direct investments (FDI), not just portfolio flows,” Guinigundo said. FDIs are investments for the construction of new factories or purchase of new equipment by foreign companies operating in the Philippines.

These investments lead to more jobs in the country compared to portfolio flows, which are merely placements in local stocks and bonds that can be pulled out at a moment’s notice.

Guinigundo said while the schedule of the US Fed’s tapering would create volatility in financial markets in the near to medium term, the real economy would benefit in the long run from a stronger US market.

“The timing is very important with respect to when the bond purchases program will be concluded. People are speculating that this is going to be done by the end of 2014,” Guingundo said.

“The third issue is when the US fed will start tightening monetary policy. They have not indicated whether this will be in the first, second, third or fourth quarter of 2015,” he added.