(UPDATE) BSP: RP economy sound, liquidity adequate
Reuters | 09/29/2008 2:58 PM
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The Philippine economy remains sound despite an unfolding global financial crisis, and domestic liquidity is adequate, with steady inflows of dollars from overseas Filipino workers, the central bank chief said on Monday.
The country's banks have limited exposure to the collapse of Lehman Brothers, a factor helping contain any large swings in domestic markets, said Amando Tetangco, the central bank governor.
Philippine banks with exposure to Lehman Brothers also assured the senators during a Monday morning hearing that they remain solid. The banks with exposure to Lehman were identified as Banco De Oro, the Development Bank of the Philippines, Metrobank, RCBC, Standard Chartered Bank, Bank of Commerce and the United Coconut Planters Bank.
"The country's macro fundamentals remain sound and the economy has proven to be resilient," Tetangco told a Senate hearing. "We have sufficient liquidity from other sources of foreign exchange."
Remittances from overseas workers, averaging more than $1 billion a month, and dollar inflows from the foreign parent firms of outsourcing and call center companies, were supporting the peso.
The peso is one of Asia's worst-performing currencies this year against the dollar, having dropped 12 percent.
The Korean won is down more than 20 percent and the Indian rupee 16 percent, while the Singapore dollar, Indonesian rupiah and Malaysian ringgit have fallen between 0.6 percent and 4 percent.
Tetangco expressed confidence that the planned U.S. bailout that goes to congressional votes this week would support financial markets.
"As soon as the details come out, that should have a positive impact on financial markets and the peso dollar market," he said.
Manila's fiscal position likewise remains manageable, providing more room for state spending to shield the economy from a global slowdown, said Dennis Arroyo, director for policy planning at the National Economic Development Authority.
The Southeast Asian country recorded a budget deficit in the first eight months of 2008 of 31.7 billion pesos, less than half of the planned shortfall this year of as much as 75 billion pesos.
"We still have headroom in case the storm worsens," Arroyo told the same Senate hearing regarding the government's fiscal position.
The Philippines has abandoned its goal of balancing the budget this year so that it can pump more money into the economy and help the country's poor cope with rising food and fuel prices.
It has said it is unlikely to tap sovereign debt markets for more funds this year and will cut its domestic borrowings as the government's cash position remains sound.
An inter-agency committee setting the government's macroeconomic targets are expected to meet within the next three weeks to assess the impact of the global financial turmoil to the Philippine economy. - with Zen Hernandez, ABS-CBN News
