GIR seen to hit $120 billion in 2021 – Diokno
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno expects the country’s gross international reserves (GIR) to climb to $120 billion this year which is $6 billion more than what the BSP announced last month as forecast.
Diokno sees a higher GIR than its forecast of $114 billion for this year and $117 billion for 2022, despite that the GDP will slightly be below target due to the extended five-week stricter lockdown.
“We expect this (GIR) to be up to $120 billion by the end of the year,” he said in a virtual discussion with Asian Development Bank’s (ADB) Dean Tetshushi Sonobe and a panel of ADB economists on Wednesday.
Diokno also echoed both finance and socio-economic senior officials in revising his GDP outlook for this year, in light of the return to a more severe lockdown measures.
“I think with the recent lockdown – this is my own guess – the economy will probably grow by 6-7 percent so there will be 0.5 percent decline as the result of additional lockdown,” he said. The original government GDP target for 2021 is 6.5-7.5 percent after a contraction of 9.6 percent in 2020.
Diokno also said in the ADB discussion that, with rating agencies’ affirmation of the Philippines’ investment grade status, he expects continued investor interest in the country to support a fuller economic recovery which he said earlier will return to pre-pandemic numbers by mid-2022.
“There’s no problem with investor confidence on the Philippine economy,” he said. He also noted that the peso, stable at the P48level, will continue to be on the strong side.
“We follow a flexible exchange rate. We do not intervene in the market except to smoothen the fluctuations. So right now the peso is strong, it’s been appreciating slightly vis-à-vis the US dollar and this is because (of) our hefty GIR (and the) steady overseas Filipino remittances,” said Diokno. “We receive on average around $30 billion (remittances) plus (revenues from) the business process outsourcing. That’s also a steady stream of US dollars, and of course, the FDI (foreign direct investments). With all this, I think there’s no threat that there will be a sharp depreciation of the local currency.”
As of end-March, the GIR stood at $104.82 billion, up by 18 percent or $15.6 billion from same time in 2020. The GIR is composed of foreign assets of the BSP invested in foreign-issued securities, monetary gold, and foreign exchange.
Diokno has said that the market-based exchange rate has contributed to the healthy GIR as buffer reserves.
He has assured investors that the peso will have the GIR as cushion against speculative attacks and it could continue to be one of the strongest currency in the world this year, same as in 2020.
The country’s external position is “looking up” as both exports and imports growth are improving. For this year, the BSP expects exports to grow by eight percent and imports to expand by 12 percent as the economy is reopened with the easing of lockdown restrictions.