On Friday, the Bangko Sentral ng Pilipinas (BSP) reported that the country’s gross international reserves (GIR) totalled to USD80.87 billion as of March 2017, lower than month-ago’s USD81.43 billion and year-ago’s USD82.98 billion.
This, however, according to Nomura Executive Director and Senior Economist for Southeast Asia Euben Paracuelles is not worrisome since the decline was caused by narrowing capital account and some capital outflows.
The economist believes that a slight drop in the country’s foreign exchange reserves “is not really surprising” because it was due to a decline in the country’s current account surplus, reported Philippine News Agency.
“I think if it goes lower on a sustainable basis then it becomes a concern. But at the moment the buffers are still large,” Nomura was quoted to have said in the report.
Paracuelles said the current level of GIR is far adequate since the international standard is about three to four months’ worth of imports.
“Again, this is a significant buffer,” he said.
The economist also pointed out that that GIR is expected to remain high since foreign investments continue to pour in the country.
“That should also help the current account narrowing,” he said.
In end-2016, the country ended with a USD601 million current account surplus, which is about 0.2 percent of gross domestic product (GDP).
This is lower than year-ago’s USD7.3 billion primarily due to higher importation to address rising requirements of the domestic economy.
He said a full-year current account deficit is possible for the country in the next years but stressed that it is only because of the government’s higher infrastructure needs and spending.
“If that materializes (higher infrastructure spending), obviously, that puts more pressure on the current account,” he said.
