The Philippines is expected to withstand the ill effects of the latest volatility in financial markets and remains poised to meet, if not surpass, its economic growth target for this year.
This was according to Socioeconomic Planning Secretary Arsenio Balisacan, who on Tuesday said the turmoil in financial markets was unlikely to weigh significantly on the country’s ability to meet the 6- to 7-percent growth target for 2013.
“Our economic fundamentals are strong. Our foreign exchange reserves can support 12 months of imports, inflation is at the low end [of the targeted range], among others,” Balisacan told reporters on the sidelines of the Senate hearing on the proposed 2014 national budget.
Investors remain concerned, however, as the withdrawal of foreign funds has caused the peso to weaken back to the 44-to-a-dollar territory since last week and the Philippine Stock Exchange index to fall below the 6,000 mark on Tuesday to close at 5,916.99 points.
But Balisacan said the movement of the peso and the stock index was still not worrisome.
“A depreciation of the peso from 42 to 43, or 44 to a dollar does not hurt,” he said. “If the peso falls to 49 or 50 at a sudden pace, then that is the time to worry,” Balisacan said.
A substantial rise or fall of a currency drags growth of an economy. A steep appreciation dampens competitiveness of exports, while a sharp depreciation causes faster inflation.
Balisacan stressed that the Philippines has enough protection against volatility.
This is because the country has sufficient foreign exchange reserves that the central bank may use to buy and sell currencies.
He also said inflation remained modest, and so any uptick in prices could be tolerated.
The Philippines has close to $83 billion in foreign exchange reserves, which is equivalent to about one year of imports.
On the other hand, inflation in the first seven months of the year averaged at 2.9 percent.
The government expects inflation this year to range from 3 to 5 percent.