The country’s foreign exchange reserves slightly dipped in 2013, weighed down by the steep drop in the price of gold in the world market and efforts to temper the peso’s depreciation.
The Bangko Sentral ng Pilipinas on Tuesday reported that the country’s gross international reserves (GIR) as of the end of December amounted to $83.75 billion, down by 0.1 percent from $83.83 billion at the end of 2012.
However, the BSP said the level of foreign exchange reserves as of the end of last year was still healthy and exceeded international benchmarks.
“At this level, the reserves can adequately cover 12 months’ worth of imports of goods and payments for services,” the central bank said in the statement.
The GIR as of end-December was short of the central bank’s forecast of $85 billion. It was, however, the highest in nine months, and said to have made the country resilient to external shocks.
The BSP also said the latest amount of foreign exchange reserves was 5.8 times the outstanding debt of private and government entities in the Philippines maturing within the short term.
Based on international standards, foreign exchange reserves should be equivalent to at least four months’ worth of imports of goods and services, or equal to debts maturing within a year in order to be considered comfortable.
The drop in the country’s GIR came as the price of gold fell by about 29 percent throughout 2013 to $1,204.50 an ounce.
The drop in the price of gold came amid reports of an improving US economy, which prompted fund owners to shift investments from gold to dollar-denominated instruments.
With the drop in the price of the precious metal, the Philippines’ gold holdings as of end-December fell by 28 percent year on year to $7.49 billion.
The minimal decline in the country’s GIR also came with the depreciation of the peso against the US dollar. To temper the peso’s weakening, the BSP had to sell dollars in the foreign exchange market.
Monetary officials said the BSP had leeway to sell dollars—a move meant to protect the peso against excessive depreciation—given the healthy level of foreign exchange reserves.
The BSP said it was actually keeping a policy of allowing a market-determined exchange rate, but that it would exercise flexibility to intervene in the market if there was a need to ease excessive currency volatility.
The peso closed at 44.395 against the US dollar on the last trading day of 2013, weaker by 8 percent compared with the 41.05 close of 2012.
Current traders said the peso could have depreciated further last year if not for the BSP’s market operations.
Meantime, BSP Governor Amando Tetangco Jr. said the Philippines would continue to have a healthy level of foreign exchange reserves in 2014.
The BSP expects the foreign exchange reserves to continue being boosted by remittances and investments in the business process outsourcing sector. It also expects improved export earnings to support the GIR.—Michelle V. Remo