MANILA, Philippines - The local currency the peso is seen as strong as P42 per dollar this year, based on a forecast bared on Wednesday by the Bank of the Philippine Islands.
It already averaged P42.777 in the first seven days of trading in March and has gained strength from the average rate of P43.619 in January and P42.661 in February.
The peso’s strength, said Tere Javier, the head of the asset management group at BPI, was based on the anticipated continued flow of foreign capital into emerging markets like the Philippines, flows supported by money sent home by some eight million overseas Filipinos and revenues from the business process outsourcing sector.
“The peso is forecast to range from P42 up to P42.30 per dollar by year’s end, supported by a five-percent growth in remittances and by sustained growth in the BPO sector,” Javier said at an early morning briefing on Wednesday.
The peso’s strength formed part of BPI’s four-point investment theme this year in which emerging market assets were seen to continue to attract fund flows, the emerging markets as source of global growth, the Philippine economy remaining resilient no matter the headwinds, and financial market volatilities persisting due to geopolitical risks and events flowing out of the euro area.
But while the remittances and BPO receipts were seen to breach record highs this year, the natural bias for the peso to appreciate should be tempered by the moderating impact of the presence of the central bank in the foreign currency market, a presence seen boosting the likelihood for the country’s gross international reserves also to hit a record high of $79 billion by the end of the year, Javier said.
According to her, the remittances were to end the year at $21.1 billion or five percent higher than last year while revenues from BPOs should rise another 19 percent to some $13 billion.
So called growth areas in the BPO sector include healthcare information, management, finance and accounting, human resources outsourcing, animation and creative process.
The Bangko Sentral ng Pilipinas (BSP), meanwhile, reported gross international reserves totaling $77.7 billion at end-February or $400 million higher than the month before as a consequence of program loan proceeds the national government obtained from the Asian Development Bank, the foreign currency deposits of so-called authorized agent banks, and the foreign exchange operations of and income from investments abroad of the BSP.
These flows compensated for payments made by the national government and the BSP on maturing foreign debt during the month and revaluation losses arising from adjustments in the value of the BSP’s gold holdings.
The price of gold in the international market fell in February.
Javier also said local output measured as the gross domestic product could grow by at least 4.2 percent to as high as 4.7 percent.
Some 71 percent of continued growth was traced to private consumption, 10 percent from government consumption and the balance from investments, Javier said.