Even with the drastic slowdown in dollar remittances this year, the country’s foreign exchange surplus would exceed $500 million this year as oil prices continued to drop.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the surplus level is not likely to exceed the original target of $2.3 billion for 2009 but said the balance of payments (BOP) would prove more resilient this year than 2008.
“The decline in oil prices has been significant and with exports also likely to be softer this year, the BOP surplus could easily better last year’s surplus,” said Tetangco late Wednesday at the end of the economic forum hosted by Security Bank.
When pressed, Tetangco said the surplus level would exceed $500 million, compared to the $88-million surplus reported by the BSP for the whole of 2008.
Tetangco said the BOP surplus would be supported by inflows from the National Government’s commercial borrowing as well as the proceeds from official development assistance (ODA) that were booked early this year.
But the central bank chief said weakening imports would also ease some pressure on the country’s reserves sine global demand is expected to fall even more dramatically this year.
As global consumption slows down, the country’s import-dependent exports would also weaken and this would hit the BOP from two opposing sides: on the one hand, there would be less dollar outflows paying for imported components and on the other, there would also be less inflow from exports.
This year, Tetangco said the country’s foreign exchange reserve is expected to hit $37.5 billion, slowing down slightly from the expansion in previous years as inflows weaken due to the global economic slowdown.
Tetangco said that the country’s gross international reserves (GIR) would reach between $37 billion and $37.5 billion, only slightly higher than the 2008 level of $37.1 billion.
Tetangco said, however, that the BSP is still comfortable with this level of reserve, although officials have yet to firm up the balance of payments (BOP) position based on this new estimate.
The country’s reserves soared to $37.1 at the end of 2008, sustaining the recovery that foreign exchange inflows made in November as a result of inflows from government borrowing and other inflows.
In 2008, the GIR surged higher than the projected $36-billion level for 2008, going up by $300 million in December from the end-November level of $36.8 million and by $3.3 billion compared with the end-2007 level of $33.8 billion.
The BSP said the annual increase in the 2008 GIR level was a result of inflows from the BSP’s foreign exchange operations, income from its investments abroad and deposits made by the National Government from its borrowings.
According to Tetangco, the country is likely to see the same factors affecting the GIR this year, boosted further by the foreign borrowing of the National Government.
At $37.5 billion, the GIR would be roughly equivalent to over five months worth of imports of goods and payments of services.