The Philippines can ride out the current volatility in the financial markets as the US Federal Reserve moves closer to normalization, the Department of Finance said over the weekend.
Finance Undersecretary Gil Beltran said in his latest economic bulletin the Philippine stock market remained strong despite recent weaknesses, ranking fourth among 11 Asian bourses, and the country’s foreign reserves were at very healthy levels.
“The country’s strong reserve position, its healthy banking system and profitable corporates should help the country avoid the deleterious effects of financial volatility from the Fed normalization,” Beltran said.
“Economic reforms should continue to be implemented to boost growth and the country’s fundamentals should continue to be protected to sustain investor confidence,” he added.
Beltran said the Philippine Stock Exchange Index had gained 11.7 percent to date, almost thrice the 4.4-percent average rise of 11 countries, behind Indonesia (19.12 percent), Thailand (16.57 percent) and India (12.09 percent).
The PSEi also performed better compared with China (-13.86 percent), Japan (-13.03 percent), Malaysia (-1.74 percent), Singapore (-0.89 percent), Vietnam (4.28 percent), South Korea (4.92 percent), and Hong Kong (9.24 percent), Beltran said.
The Bangko Sentral ng Pilipinas’ gross intentional reserve are high at $85.9 billion as of end-August this year, which can cover 10.5 months’ worth of imports of goods and payments of services and income.
“The BSP’s current reserve level also stands very comfortable than other Asian central banks,” said Beltran.
Indonesia’s foreign reserves can only cover 3.9 months’ worth of import duties; Malaysia, 5.4 months; and Singapore, 6.3 months.
South Korea has 6.1 months of buffer; Taiwan, 1.5 months; India, 6.9 months; and Vietnam, 2.3 months.
Beltran said “the country’s GIR is also better compared to the Asean-6 with 6.5 months buffer, and Asean-5’s 5.7 months.
He said the Bangko Sentral could take the peso depreciation as an opportunity to further boost its current reserve holdings, while sustaining the competitiveness of exports.
“As of September 22, the peso weakened to 47.85 against the US dollar from P47.15 at end-December last year owing to the normalization of interest rates in the US and the economic slowdown in China,” he said.
The peso has fallen 1.47 percent to date, trailing gains of 5.2 percent in Indonesia’s rupiah, 3.5 percent in Malaysia’s ringgit, 3.92 percent in the Thai baht, 4.78 percent in Singapore’s dollar, 6.11 percent in Korea’s won, and 0.85 percent in Vietnam’s dong.
Asian currencies on average rose 2.8 percent with five of 13 countries showing depreciation rates ranging from 0.1 percent for Hong Kong to 9.9 percent for China.
“The Philippine peso depreciated by only 1.5 percent year-to-date but showed the biggest depreciation month-to-date as the positive impact of the May election on the peso subsided,” Beltran said.