The country’s foreign exchange reserves, after posting double-digit annual growth rates since 2004, are seen to stay nearly flat this year due to heightened global risk aversion that is tempering investments in portfolio assets from emerging markets like the Philippines.
According to the Bangko Sentral ng Pilipinas, the gross international reserves (GIR) may not significantly change this year because stronger inflows of remittances, investments in business process outsourcing and tourism revenues, among others, may be offset by outflows resulting from reduced appetite for portfolio investments.
The GIR—the amount of foreign exchange reserves that determine the country’s ability to purchase imports, pay debts to foreigners and engage in other financial transactions with the rest of the world—stood at $75.1 billion at the end of 2011, up 20 percent from the previous year’s $62.4 billion.
The foreign exchange reserves had consistently been growing at double-digit rates and registering record highs since 2004, when these stood at only P16.2 billion.
This year, however, BSP Deputy Governor Diwa Guinigundo said that should the foreign exchange reserves grow, the increase may be minimal and far slower than the growth rates registered the previous years.
“Given the global market volatility, it would be prudent to expect a generally stable GIR level this year,” BSP Deputy Governor Diwa Guinigundo told the Inquirer.
According to latest central bank report on the country’s external liquidity, the GIR amounted to $76 billion at the end of April. The amount was equivalent to about 11 months’ worth of imports—a level considered comfortable by monetary officials.
The country’s GIR had been growing in past years due to strong inflows led by remittances and investments in business process outsourcing sector.
The BSP still expects remittances to grow this year, but by only 5 percent from last year’s $20.1 billion, which is slower than the rates of previous years.