PH Gross Int’l Reserves boosted by OFW remittances, BPO receipts

The Philippines’ gross international reserves (GIR) slightly dipped to US$108.45 billion in January from US$108.79 billion in December but an economist said an increase or a record-high is possible as structural inflows remain strong.

The Bangko Sentral ng Pilipinas (BSP) attributed the drop in the country’s dollar reserves, based on preliminary data, to payments of the government’s foreign currency-denominated debts and the decline in the prices of gold in the international market, which affected the value of the central bank’s gold holdings.

In his report on Friday, Rizal Commercial Banking Corp. chief economist, Michael Ricafort said the country’s current level of foreign exchange reserves, which is equivalent to 10.3 months’ worth of imports of goods and service payments, remains way above the international threshold of three to four months’ cover.

Ricafort said the country’s GIR “provides greater cushion/support/buffer on the peso exchange rate vs. any speculative attacks.”

“For the coming months, the country’s GIR could still post new record-highs amid the continued growth in the country’s structural inflows from OFW (overseas Filipino workers) remittances, BPO (business process outsourcing) revenues, foreign tourism revenues (resumed since Feb. 10, 2022), as well as foreign investment/FDI (foreign direct investment) inflows, most of which are among record-highs/pre-pandemic highs recently,” he said in a statement.

Ricafort said OFW remittances and BPO receipts each post about US$30 billion inflows annually and “are more than enough to cover the yearly trade deficit/net imports that reached US$43.1 billion for 2021.”

He said these factors are seen to get a further lift from fund-raising activities of both the government and the private sector, as well as investment banking activities, “especially those from abroad,” which are also seen to boost the country’s GIR level in the coming months.

These inflows are, however, seen to be countered by the widening trade deficit of the country and some net foreign debt payments.

“Thus, near record-high GIR and prospects of reaching new record-highs in the coming months could further strengthen the country’s external position, which is a key pillar for the country’s continued favorable credit ratings for the second straight year, mostly at 1 to 3 notches above the minimum investment grade, a sign of resilience despite the Covid-19 (coronavirus disease 2019) pandemic that caused downgrades in other countries around the world,” Ricafort added.