By Joann Santiago
MANILA, March 30 (PNA) — Foreign investors continue to place their funds in the Philippines, reinforcing economic managers’ confidence that the country remains attractive to offshore investors.
Bangko Sentral ng Pilipinas (BSP) data show that as of the week ending March 13, 2015, the country registered a net inflow of foreign portfolio investment or hot money, dubbed due to the speed it comes in and out of an economy, of USD 1.75 billion.
This is a reversal compared to the USD 1.89 billion net outflows in the week ending March 14, 2014.
Central bank officials believe that amid the widely expected normalization in United States interest rates this year, foreign investment inflows to the Philippines will remain strong.
In its Report on Economic and Financial Development for the last quarter of 2014, the BSP said negative impact on inflows of the US interest rates normalization is seen to be countered by the easy monetary policy in Japan and the Euro zone.
The central bank report said emerging markets (EMs), including the Philippines, “could face a reversal in capital flows and exchange rate pressures” as well as tighter financial conditions because of the projected volatilities in the global financial markets.
This volatility, it said, has the possibility to affect real sector activity through increased risk aversion, sharp increases in long-term interest rates, tighter access to external financing, and possible foreign exchange market pressures.
”The potential adverse impact of the Fed’s monetary normalization on liquidity, interest rates, and capital flows could be counterbalanced, although not completely offset, by the continued accommodative monetary policy in the euro area and Japan,” it said.
Philippine monetary officials have continuously stressed that the domestic economy has the capacity to remain resilient given the measures that have been put in place.
For one, the central bank’s policy rates remain low, with the overnight borrowing or reverse repurchase (RRP) rate at four percent and the overnight lending or repurchase (RP) rate at six percent.
The BSP is among the few central banks in the region that has not increased it key rates even as its counterparts overseas have raised their respective rates.
BSP Deputy Governor Diwa Guinigundo recently said they see no need to increase key rates to date since inflation remains low and domestic growth remains robust.
”The economy hardly needs it,” he said.
The central bank executive said slashing the key rates now is counter intuitive because it will translate to lower lending rates and increase the country’s external competitiveness.
”The stimulus can come from the fiscal side – higher public spending and good agricultural policy. Trade policy is also very critical in providing additional support to economic growth,” he added. (PNA)