PH can withstand further volatilities: Fitch


Posted at Nov 21 2011 02:52 PM | Updated as of Nov 22 2011 02:26 AM

MANILA, Philippines - The Philippines can withstand further volatility in the global economy because of its strong foreign exchange reserves, Fitch Ratings said in a report released on Monday.

Fitch's report entitled “Emerging Asian Sovereign Pressure Points" said that the Philippine foreign exchange reserves' capacity to handle potential capital outflows in a period of risk aversion is among the strongest in the region.

"Exposure to a sharp deterioration in global market liquidity as judged by the adjusted liquidity ratio appears greatest for Indonesia, Korea and Malaysia, and more limited for China, Taiwan and the Philippines," Fitch said.

For emerging Asian countries like the Philippines, Fitch said exposure to a “sudden stop” in external financing appears limited.

"Financial market disruption and the impact that may have on the balance of payments can feed through into the real economy and hurt performance. The current account balances (CAB) for emerging Asia suggest the region as a whole is well placed to handle a liquidity shock," Fitch said.

Last week, the Bangko Sentral ng Pilipinas (BSP) reported the balance of payments (BOP) surplus was $9.929 billion in the first 10 months of the year due to inflows from portfolio investments, exports and remittances. The BSP is reviewing its 2011 BOP surplus forecast of $6.7 billion.

In October, the country’s gross international reserves also increased by $600 million to $75.8 billion from the previous month's level due to the BSP's foreign exchange operations and income from its investments abroad as well as revaluation gains on its gold holdings.

Authorities have been saying that international credit rating agencies, including Fitch, have underrated the Philippines' sovereign ratings by one to two notches.

Finance Secretary Cesar V. Purisima and BSP Governor Amando M. Tetangco Jr. have noted that the Philippines' macroeconomic fundamentals including reserves coverage, inflation rate, economic growth, external payments position, and debt service ratios were better compared with other countries.

The credit ratings given to the Philippines by 3 major international ratings firms – Moody’s, Standard & Poor’s, and Fitch – were all below investment grade.

The Philippines received a series of credit rating and credit outlook upgrades from the 3 agencies within the first year of the administration of President Aquino.