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HE Bangko Sentral ng Pilipinas (BSP) reported a slight decrease in the country’s dollar reserves at the start of the year, bucking the 12 consecutive months of increase in gross international reserves (GIR) in 2020. The country’s GIR hit $108.8 billion in January this year, slightly declining from its $110.12-billion level in December 2020. The decrease was largely brought about by the downward valuation of the BSP’s gold holdings, as well as the lower income from its foreign investments during the year. The country’s GIR is the level of foreign-exchange holdings that is being managed by the Central Bank during a given period. It is a crucial component of the economy as it is often used to manage the country’s
foreign-exchange rate against excess volatility. The Philippine GIR has been rising steadily for the whole of 2020 amid the pandemic, as the local currency remained strong against the US dollar. Despite the January decline, the BSP said the current GIR level still represents an adequate external liquidity buffer, which can help cushion the domestic economy against external shocks. In particular, the current GIR level is still equivalent to around 11.6 months’ worth of imports of goods and payments of services and primary income. It is also about 9.4 times the country’s short-term external debt based on original maturity, and 5.1 times based on residual maturity, ac-
FILE PHOTO
PHL GIR snaps 12-month hike in January
cording to the Central Bank. The BSP attributed the monthon-month decrease in the GIR level to outflows, mainly from the foreign-currency withdrawals of the national government (NG) from its deposits in the BSP to pay its foreign-currency debt obligations,
and revaluation adjustments from the BSP’s gold holdings as the price of gold declined in the international market. The decline could have been larger, if not partly offset by the inflows from the BSP’s foreignexchange operations. Bianca Cuaresma
REMITTANCES DOWN ONLY SLIGHTLY IN ‘20
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Tuesday, February 16, 2021 Vol. 16 No. 128
P25.00 nationwide | 2 sections 20 pages |
ECONOMY TO TRACK ‘DIRTY’ L-SHAPED RECOVERY IN 2021 By Tyrone Jasper C. Piad
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A woman drives past the Zuellig Pharma Corporation office in Parañaque on Monday, February 15. Reports said at the weekend that it is ready to manage Covid-19 vaccines with its cold chain facilities after expanding its capacity. Zuellig Pharma’s chief business officer Janet Jakosalem said in an interview they can provide all the temperature requirements for the vaccines. NONIE REYES
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By Bianca Cuaresma
@BcuaresmaBM
ILIPINO migrant workers were able to pull through and send almost as much money back home during the pandemic as they did before the global health crisis, data from the Bangko Sentral ng Pilipinas (BSP) showed.
The BSP announced on Monday that overseas Filipino workers’ (OFW) cash remittances to the Philippines hit $29.9 billion for the full year of 2020, only $230 million short of what they sent— $30.13 billion -- when the global economy was not affected yet by
the pandemic in 2019. The 0.8-percent decline in remittances also exceeded the BSP’s expectations that remittances will decline by about 2 percent. By source, cash remittances from Saudi Arabia, Japan, the United Kingdom (UK), the United
Arab Emirates (UAE), Germany, and Kuwait declined, while those from the United States (US), Singapore, Canada, Hong Kong, Qatar, South Korea, and Taiwan increased. The US posted the highest share of the total remittances at 39.9 percent, followed by Singapore, Saudi Arabia, Japan, the UK, the UAE, Canada, Hong Kong, Qatar, and South Korea. The combined remittances from these areas accounted for 78.6 percent of the total cash remittances during the year. “Overseas Filipinos find a way again. Remittance flows bucked the general expectation for a substantial contraction in 2020 with Overseas Filipinos [OFs]
managing to send home muchneeded funds despite the challenges faced on the economic and health front,” ING Bank economist Nicholas Mapa said. “Initially, analysts had expected an alarming drop in remittances as the usual ‘hedge’ against a downturn was negated with the virus striking just about every country across the globe. Despite lockdowns, threats to health, the shutdown of the cruise line industry and repatriation due to widespread job losses abroad, remittances fell by only 0.8 percent, with OFs finding a way to send home much-needed funds to help support their loved ones,” he added. Continued on A2
BSP seen to keep policy rate, RRR on hold
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FTER a year of aggressive monetary-policy easing, the Bangko Sentral ng Pilipinas (BSP) is expected to hold monetary-policy settings unchanged for the entire 2020, a banking economist said. Speaking at ING’s Economic
Briefing on Monday, ING Bank economist Nicholas Mapa said the Central Bank will likely keep both the main monetary-policy rate and the reserve requirement ratio (RRR) of banks on hold for the entire year. “By pausing, they are keeping
PESO exchange rates n US 48.0320
the 2 percent as it is still quite accommodative. They are keeping the support in terms of monetary stimulus while at the same time pausing from their recent rate cut cycle given the inflation dynamics right now,” Mapa said. In 2020, the BSP aggressively
cut its interest rates to spur activity in the local economy. In total, the Central Bank has already cut its rates by 200 basis points to push its overnight reverse repurchase rate at an all-time low of 2 percent. See “BSP,” A2
@Tyronepiad
FTER Covid-19 erased three-year economic gains, the Philippine is bound to have a “dirty” Lshaped recovery in 2021, an economist said, anticipating an average growth of 4.7 percent. ING Bank Manila Economist Nicholas Antonio T. Mapa said in an online briefing on Monday that the Philippine economy began this year with a low base after gross domestic product (GDP) contracted by 9.5 percent on average in 2020 as a result of the pandemic-induced lockdown protocols. With this, Mapa noted that the P4.9-trillion economy prior to the pandemic saw a drop to P3.9 trillion last year, which is the same GDP level in 2016. “We can say in some sort of fashion that Covid-19 wiped out three years’ worth of economic gains,” Mapa said. “We are now operating at that base.” Considering this, he said that a 3.4-percent decline in GDP is likely in the first quarter. It is expected to recover to 13 percent in second quarter; 5.9 percent in third quarter; and 5 percent in fourth quarter. The forecast hinges on many factors, including a “not too rosy” job market outlook, he said, which will affect private consumption spending—a major GDP contributor. While the easing of lockdown measures paved the way for some job creation, Mapa said the country is still behind. “With no income, it is difficult for us to expect a strong bounce back for a good portion of the society,” he explained. The unemployment rate, to recall, peaked at 17.7 percent in April last year before going down to 8.7 percent in October. Both figures, Mapa noted, are above the 5.5-percent average jobless rate prior to the pandemic. The downturn in job oppor-
tunities, in turn, affected the consumer confidence, Mapa said, noting that the consumer expectations index—as reported by the Bangko Sentral ng Pilipinas—slid to -47.9 percent from pre-pandemic 1.3 percent. “This [consumer confidence] is actually tied to your job prospects, job security. With that type of job market, you cannot expect to have consumer confidence,” he explained. Mapa said some consumers may do revenge shopping, but it would not be at the same pace prior to the pandemic.
Capital formation weak
Meanwhile, Mapa also said that capital formation may not likely return soon given that bank lending is currently in decline as businesses are reluctant to invest or expand. Outstanding loans of universal and commercial banks declined by 0.7 percent in December 2020—the first contraction in 14 years. “Even if BSP has cut [the policy rates] rather aggressively, borrowing costs have not really followed suit in 2020. The spread is actually quite substantial,” he said. “This has been tied to banks being a little more circumspect in giving out loans for the mere fact that there is a lot of risk out there.” The overnight reverse repurchase facility is currently at 2 percent after a total cut of 200 basis points last year. In terms of consumer loans, Mapa is also not seeing immediate recovery. “Given the struggles on the ground with the job market still quite challenging, maybe some bounceback once again [on] base effects will roll in by early next year. But a true return to the double-digit sustained level of expansion in consumer loans may be closer to end-2022 when the job market hopefully stabilizes,” he explained. Continued on A2
n japan 0.4576 n UK 66.5531 n HK 6.1956 n CHINA 7.4651 n singapore 36.2615 n australia 37.3017 n EU 58.2436 n SAUDI arabia 12.8068
Source: BSP (February 15, 2021)