PH pulls in ‘hot money’ despite poor growth data

A net inflow of hot money worth $181.06 million was posted during the week that the government announced lower-than-expected first-quarter economic growth, as external developments pushed portfolio investors to emerging markets like the Philippines.

Data from the Bangko Sentral ng Pilipinas (BSP) for the period May 15-19 showed $437.92 million worth of inflows exceeded the $256.86-million outflows.

The government last May 18 reported that the gross domestic product (GDP) grew 6.4 percent in the first three months of the year, below most forecasts. Socioeconomic Planning Secretary Ernesto M. Pernia had blamed the disappointing figure to slower government spending, higher prices of consumer goods and the lack of a boost from election-related expenditures present last year.

Pernia had nonetheless pointed out that the Philippines remained among the fastest-growing Asian economies during the three-month period, only behind China’s 6.9-percent expansion.

“Prior to the release [of the first-quarter GDP report], investors were anticipating a stronger growth data of about 6.7 percent. Bets of an upbeat data likely attracted more foreign investors into the country. Toward the end of the week, there were outflows as the country’s first-quarter growth missed market expectations,” Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said.

“The outflows, however, were not enough to completely offset the initial inflows, suggesting that investors remained generally confident about the strength of the Philippine economy,” Dumalagan added.

Another economist also took note of Trump’s alleged dealings with Russia, which have been making headlines and stirring market woes.

“Given that [US President Donald J.] Trump would be battling his political survival, the Fed would probably not be able to hike rates as aggressively, and thus emerging markets rallied,” the economist noted. Markets have been betting on a rate hike by the US Federal Reserve this month.

Also, “hopes for an OPEC extension also boosted risk-taking behavior,” he added, referring to moves from members of the Organization of the Petroleum Exporting Countries to extend production cuts and ease the glut.