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Philippine officials Thursday tried to calm the domestic markets, which were battered by the news that the US Federal Reserve would further reduce the monetary stimulus that has been propping up the American economy since late 2009.
One official said that the country’s “strong fundamentals” should set it apart from other emerging economies once the dust settles.
Most financial markets were in the red on Thursday after the news of the reduction broke out.
Philippine share prices dropped across the board. Likewise, the peso touched a fresh three-year low before closing at 45.32:$1, despite testing the 44 level earlier this week.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. Thursday welcomed the Fed’s announcement (Thursday morning, Manila time), explaining that it eased some of the uncertainty that has plagued asset prices of emerging markets since last year.
“When the dust settles, we hope markets would distinguish between emerging market economies that have weak current accounts and those that have strong fundamentals, such as the Philippines,” Tetangco said in a statement.
He said volatile conditions should remain, in the meantime, as fund managers accelerate the adjustment in their portfolios to favor advanced economies like the United States.
“Our domestic participants would be well served if they continue to keep their eyes on the fundamental story of the country,” Tetangco said.
Despite the devastation of Supertyphoon “Yolanda” and other natural calamities, the Philippine economy grew by 7.2 percent in 2013, beating most analysts’ estimates and the government’s own target of 6 to 7 percent.
The Federal Open Market Committee (FOMC) this week announced another $10-billion reduction in the Fed’s monthly asset purchases starting February, following an initial cut to $75 billion this month.
The Fed’s bond-buying program, through which it buys mortgage-backed securities and medium-tenor US Treasuries, was introduced in 2009 to drive interest rates down, aiding the recovery of America’s crisis-ravaged economy.