The Bangko Sentral ng Pilipinas has cut its forecast on the country’s reserves of dollars and other foreign currencies for 2012, from an original projection of $79 billion to between $77.5 billion and $78 billion.
The Bangko Sentral ng Pilipinas has cut its forecast on the country’s reserves of dollars and other foreign currencies for 2012, citing the adverse impact of the ongoing crisis in the eurozone on investment appetite of foreign fund owners.
From an original projection of $79 billion, the BSP now expects the gross international reserves (GIR) to settle anywhere between $77.5 billion and $78 billion by the end of this year.
The cut in the GIR forecast comes together with the reduction in the central bank’s projection on the balance of payments (BOP).
The central bank now sees the BOP ending this year at a surplus of $2.6 billion, down from the original projection of $2.8 billion.
A surplus in the BOP adds up to the GIR, which is the country’s wealth of foreign-currency reserves that indicate an ability to pay for imported goods, settle debts to foreign creditors and engage in other external financial transactions.
Key sources of inflow are remittances, export revenues, foreign direct investments and foreign portfolio investments. Outflows are led by import payments and servicing of foreign debts.
BSP Governor Amando Tetangco Jr. said the cut in the GIR and BOP forecasts took into account the latest indicators showing an anemic performance of the Philippines in terms of attracting portfolio and direct investments from foreigners.
He said this was attributed to the prolonged debt crisis in Europe and the volatile economic condition of the United States. Both factors were dampening the appetite of foreign investors, the BSP chief explained.
“The revisions took into account the latest, actual figures [on foreign direct and portfolio investments], as well as prospects for attracting foreign investments in the coming months given the developments in Europe and the United States,” Tetangco told reporters on Monday at the sidelines of an economic forum organized by The Asset, a foreign business magazine, and the Financial Executives of the Philippines (Finex).
Data from the central bank showed that net inflow of FDIs amounted to $14 million in March, falling by 91 percent from $158 million in the same month last year. Foreign portfolio investments posted a net inflow of $333.43 million in April, down 51 percent from $673.8 million in the same month last year.
But Tetangco said the central bank was keeping its remittance growth forecast for this year at 5 percent to $21.1 billion. The BSP said it believed that notwithstanding the crisis in the eurozone, remittances would still grow because of the strong demand for Filipino workers in alternative labor markets.