MANILA, Philippines–Volatile financial market conditions that were seen since the middle of 2013 are likely to persist this year, but the Philippine economy will have little trouble weathering the storm, the central bank said this week.
With more-than-enough reserves in the government’s back pocket, the continued surge in dollar revenues from remittances and the outsourcing sector keeping the peso strong, the country’s growth prospects remain intact.
“The country will remain resilient to the potential waves of turbulence ahead, as the rebalancing of global growth prospects continues,” Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said on Tuesday.
He said in the coming year, emerging markets face challenges mainly from the divergence of policy settings in advanced markets.
On one hand, the US Federal Reserve is expected to start tightening policy settings for the first time since the 2008 Global Financial Crisis to allow the American economy to stand on its own feet.
The situation in other markets, however, is more dire. Both the Japanese and Eurozone central banks are still in the process of loosening monetary settings.
This divergence, policymakers have warned, may cause additional volatility in markets as investors’ cash moves from one part of the world to another in search of higher yields.
“The outlook for emerging markets has become relatively more subdued,” Tetangco said.
For January to November 2014, the country posted a balance of payments (BOP) deficit of $3.7 billion, largely a result of short-term investors divesting from the Philippines.
Despite possible challenges from overseas, Tetangco said the Philippines had enough ammunition to survive.
He noted the country’s ample reserves, which stood at $79 billion at the end of November 2014, latest data showed.
This was more than enough to cover more than 10 times the country’s monthly import bill.
Remittances form overseas Filipino workers (OFW) will also help ensure the stability of the local currency.
Remittances likely grew by at least 5.5 percent in 2014 to a record high of $24 billion.
Income from business process outsourcing (BPO) also contributed to the country’s recurring sources of dollar revenues that keep the peso stable.