Government to assess impact of Japan disaster on Phl economy

MANILA, Philippines – Economic and monetary authorities under the Aquino administration are now reviewing the country’s macroeconomic and monetary targets in light of the impact of the devastating magnitude 8.9 earthquake and tsunami in Japan last March 11.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said in an interview with reporters over the weekend that the disaster would have an impact on the country’s trade, amount of money sent home by Filipinos abroad, and availment of official development assistance (ODA) funds.

“These are the areas but what extent the potential effect would depend on (several factors), Once the complete assessment has been made we will know better,” Tetangco stressed.

The BSP chief said Japan is a major trading partner. Latest data showed that Japan is one of the biggest buyer of Philippine-made exports, accounting for 16.2 percent of the country’s total shipments last year.

Furthermore, it is also the biggest source of imports as it cornered a 12.3 percent of the country’s total purchases last year.

Likewise, Tetangco added that the deadly earthquake and tsunami would also have an impact on the remittances from overseas Filipinos as Japan accounted for 4.7 percent or $883 million of the total remittances of $18.76 billion last year.

He pointed out that authorities would also look into the impact on ODA funds as the Philippines is the fourth largest recipient of concessional loans from Japan next to Indonesia, China, and India having availed about $20 billion between 1967 and 2008.

The BSP chief added that the impact of the disaster on inflation would also have to be reviewed in light of its possible impact on oil price with the review of the use of nuclear energy that could result to higher demand for other forms of energy such as oil.

The BSP has set an inflation target of three percent to five percent between 2011 and 2014 but expects inflation to average 4.4 percent this year and 3.5 percent next year.

Likewise, Tetangco said monetary authorities would also undertake the normal review of monetary targets such as the country’s gross international reserves (GIR), balance of payments (BOP), and OFW remittances next month.

“There is a normal review to assess for all our projections, including our BOP projections,” he said.

The central bank sees the country’s GIR hitting a new record level of $68 billion to $70 billion and the BOP surplus ranging between $6 billion and $8 billion this year. Money sent home by OFWs would grow eight percent to breach the $20 billion level this year.

The country’s GIR – the sum of all foreign exchange flowing into the country – surged 36.8 percent to a record level $62.371 billion last year from $45.03 billion in 2009 while the BOP – the difference of foreign exchange inflows and outflows – posted a new all-time high surplus of $14.4 billion from $6.42 billion.

OFW remittances went up by 8.2 percent to hit a new record level of $18.76 billion last year from $17.348 billion in 2009 due to the continued demand of skilled Filipino workers abroad.

However, Tetangco said the Philippines could also benefit by participating in the reconstruction efforts in Japan.

“Overall, the short term effect of the Japanese situation may be somewhat negative. But over the medium to long term, it is going to be positive because of the rebuilding and reconstruction efforts that will boost the Japanese economy,” he explained.

Furthermore, Tetangco said the situation in Japan as part of the environmental assessment would be taken into consideration during the second policy setting meeting of the BSP scheduled on March 24.

He reiterated that the scope or keeping interest rates steady has narrowed due to the continued build up in inflation pressures with inflation kicking up to a nine-month high of 4.3 percent in February from 3.5 percent in January. “I think that the statement i made two weeks ago still holds,” Tetangco clarified. –Lawrence Agcaoili (The Philippine Star)