Bangko Sentral said the gross international reserves may hit $50 billion within the year, higher than the government’s target of $49 billion.
“That is a possibility. In fact, it is probable,” Bangko Sentral Deputy Gov. Diwa Guinigundo said. “In terms of the GIR, as of May 2010, we are now close to $48 billion. So what is $2 billion more given that we still have seven months.”
He said, however, that external challenges might pose threats to the target, along with other economic forecasts for the balance of payments, foreign direct investments and portfolio investments.
“We should at the same time be more sober in terms of appreciating those numbers, given that the global economy continues to be uncertain. The ability of the euro zone to put order in their debt numbers and their fiscal position will be an important consideration here,” he said.
Bangko Sentral is also watching the developments in the United States, especially its employment figure, which is an effective gauge of the performance of the world’s largest economy.
Bangko Sentral is looking at a full-year balance of payments surplus of $3.7 billion, a current account surplus of $8.1 billion, total remittances of $19.4 billion of which $18.7 billion are coursed through banks, $42 billion in merchandise exports, $54.7 billion in merchandise imports, $2.5 billion exports of services, $2.9 billion in foreign portfolio investments and $2 billion of foreign direct investments.
Guinigundo said that given the strong performance of the economy as well as the positive balance of payments numbers in the first quarter, the economy was on track of meeting the full-year targets.
Bangko Sentral Assistant Gov.Ma. Cyd Tuaño-Amador, in a presentation in Cebu last week, noted that the international reserves had risen to the point it could cover the country’s external obligations. The country’s external debt stood at $53.3 billion as of end-2009.
Higher foreign inflows have prompted Bangko Sentral to use the occasion to build up the GIR, while stabilizing the movement of the peso, according to economists.
Amador conceded that Bangko Sentral embraced its policy of building up international reserves to smoothen appreciation pressures on the peso in the past.
The bank also pre-paid some of its foreign currency debt, liberalized the foreign exchange regulatory framework and encouraged the shift in national government’s borrowing mix in favor of domestic borrowing.
Without those measures, the peso may have appreciated faster against the US dollar, to the disadvantage of exporters and relatives of Filipinos overseas.
Remittances from Filipinos overseas remain the largest source of foreign exchange in the country, although Bangko Sentral admitted that its growth may plateau in the coming years.
“I think at this point, when you have $15 billion to $17 billion, going up to $19 billion to $20 billion [in remittances], I think we have reached some critical numbers, which we will have some plateauing or flattening of the growth,” Guinigundo said.
“But $20 billion, $21 billion, $22 billion is still a large number relative to GDP. That would in fact represent about 11 percent to 12 percent of the GDP. So it’s a large number,” he said.
