LOOKS like the Philippine economy is building up its “immune system,” too.
The Bangko Sentral ng Pilipinas (BSP) reported a $30.5-million increase in the country’s gross international reserves (GIR) in June, allowing the Philippines to hit an all-time-high level of dollar defenses amid the global pandemic.
The $30.5-million increase brought the Philippine GIR level to $93.29 billion, the highest on record anew, surpassing the already all-time-high GIR in the previous month.
The country’s GIR is the level of foreign-exchange holdings the Central Bank has during a given period. The GIR is a crucial component of the economy as it is often used to manage the country’s foreign-exchange rate against excess volatility.
The GIR represents the BSP’s first line of defense against a run on the currency, with the Central Bank drawing down on its reserves in times of stark Philippine peso depreciation and building up reserves when the Philippine peso enjoys an appreciation bias,” ING Bank Economist Nicholas Mapa said.
“The month-on-month increase in the GIR level reflected inflows mainly from the national government’s foreign currency deposits with the BSP. These inflows were offset, however, by the foreign currency withdrawals made by the national government to pay its foreign currency debt obligations,” the BSP said in a statement.
At this level, the BSP said the Philippines has enough reserves to cover 8.4 months’ worth of imports of goods and payments of services and primary income. It is also about 7.3 times the country’s short-term external debt based on original maturity and 4.8 times based on residual maturity.
According to ING’s economist, the country’s GIR is expected to rise further in the coming months despite the global economic slump brought about by the global pandemic.
“For the moment, BSP is not busy defending the peso, with the currency one of the best performing currencies in the region despite the projected drop in OFW remittances. Meanwhile, a narrowing trade deficit has been positive for the Philippine peso and the external position, although it may have medium-term implications on the growth trajectory,” ING’s Mapa said.
“Thus, BSP will continue to remain present in the market to smooth out any sharp fluctuations in PHP spot trading and will likely look to build GIR further with the peso likely to retain its strengthening bias with global central banks opening the taps to help combat the fallout from the pandemic,” he added.
