GIR seen to set new records in ’13

The country’s foreign exchange reserves—now at a historic high of about $82 billion—may continue breaking records next year as expectations of faster economic growth and the probability of an investment grade fuel more dollar inflows.

This was according to the Bangko Sentral ng Pilipinas, which said that favorable prospects for the economy next year might lead to increased inflows of foreign exchange, particularly in the form of foreign portfolio and direct investments.

“Balance of payments surplus will likely provide more dollars to the market, resulting in the BSP’s ability to accumulate more foreign exchange for its reserves,” BSP Deputy Governor Diwa Guinigundo told the Inquirer.

The $81.9 billion in gross international reserves (GIR) as of the end-September was enough to pay for 11.8 months’ worth of imports and 6.5 times the country’s foreign currency-denominated debts maturing within the short term.

This GIR level is also higher than the combined outstanding foreign currency-denominated debts of the government and private entities in the Philippines.

The country’s outstanding external debt stood at $62.5 billion as of the end of the first semester, data from the central bank showed.

The BSP believes the Philippines will hit its economic growth targets of 5 to 6 percent for this year and 6 to 7 percent for next year.

It also said there was a good chance the country would get an investment grade by next year, especially since all the three major international credit ratings agencies have given the Philippines a rating of just one notch below investment grade.

These, Guinigundo said, would help the country win the favor of more investors.

“The credit ratings upgrade and continued macroeconomic stability will encourage more dollar inflows,” the central bank official said.

Last week, Moody’s Investors Service upgraded its credit rating for the Philippines from Ba2 to Ba1, or from two notches to just one notch below investment grade. Earlier, Fitch Ratings and Standard & Poor’s gave the country the same rating.

The three credit watchdogs cited encouraging economic growth performance, even amid problems confronting the global economy, in their assessment of the country’s credit standing.

In the first semester, the Philippine economy grew by 6.1 percent from year-ago level, even as the eurozone was in recession and the United States economy was struggling with unemployment and weak consumption problems.

Also, remittances from Filipinos overseas are expected to continue supporting the country’s foreign exchange reserves.