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News Diokno: Forex reserves could hit $110B in 2021

Tagapagbalita 

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The country’s gross international reserves (GIR) could hit $110 billion this year and would continue to cushion the economy against external shocks, according to the central bank.

“We’re looking at maybe $110 billion [in GIR] this year, and even $120 billion next year,” Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said in a virtual broadsheet interview on Wednesday.

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Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno (TMT file photo)

His projection is higher than the official forecast of $106-billion foreign-exchange reserves for 2021, which is equivalent to 10.9 months of import cover.

The BSP has said current and financial account inflows would support the continued buildup in GIR this year.

It estimated the current account to post a lower surplus of $6.1 billion, or 1.5 percent of the country’s gross domestic product, this year.

“This considers mainly the expected widening of the trade-in-goods deficit, as both exports and imports of goods recover with projected growth rates of 5.0 percent and 8.0 percent, respectively, following expectations of [a] stronger rebound in global and domestic demand conditions next year,” the central bank said.

Services exports and imports are expected to grow by 6.0 percent and 7.3 percent, respectively, this year, consistent with the foreseen pickup in both travel and business process outsourcing receipts.

Inflows from overseas remittances are also seen to recover and expand by 4.0 percent.
“These positive estimates are hinged primarily on increased global mobility as countries and sectors continue to open facilitated by increased availability of the vaccine against Covid-19,” the central bank chief said.

On financial account inflows, foreign direct investments are forecast to rebound with inflows of $7.5 billion and foreign portfolio investments to reach $3.5 billion in 2021 “in line with the consensus view of a recovery in investment sentiment given better global and domestic economic prospects next year.”

As of last November, the country’s forex reserves hit a record $104.51 billion on the back of the central bank’s forex operations and income from its investments abroad.

Diokno attributed this to the banking regulator’s market-determined forex policy.

“The BSP, as a matter of policy, does not target a particular level of the peso. It is determined by the supply and demand mechanism. Of course, early on we have adopted a fully flexible exchange rate,” he said.

“And it has helped us, actually, in many ways because it lets the market determine the peso. And as a result of that, it does not to create a lot of problems for us,” he added.

 
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