‘PHL treading on asset-bubble path’

The Philippines experiencing an asset bubble might be remote now but it is possible that it eventually would, the Asian Development Bank (ADB) said on Tuesday.

“There’s no bubble here, let me clarify that, but there’s always a risk, there’s always a risk,” ADB Senior Country Economist Norio Usui said during a forum organized by the Center for Philippine Futuristics Studies and Management Inc.

Usui added that monetary officials should be on their toes “and pay close attention” to signs that an asset bubble may be forming.

He explained during the forum that the asset bubble might grow if the level of macroeconomic stability in the short term was hobbled by the global easing of crisis-hit countries which is pushing the continuous inflow of money into countries like the Philippines.

The signs that the country is now on that path are the continuous flow of money mainly from Filipinos working overseas and from portfolio investments.

Money sent by millions of overseas Filipinos in February was nearly the same level as “hot” money that flowed into the system, based on data from the Bangko Sentral ng Pilipinas on Monday.

The BSP said on its web site that personal remittances from overseas Filipinos amounted to $1.9 billion, higher by 6.9 percent than those remitted in the same month a year ago.

The hard cash is just hundreds of millions below the $2.1 billion worth of portfolio investments registered in February, while these are also half of the export receipts of $3.74 billion recorded by government’s statisticians.

“If these money find the appropriate catchbasin, then no problem,” Usui said.

However, he added that “if this money cannot find its final destination, then that’s a cause for worry.”

Usui has maintained the ADB’s view in its report released last week that a guarded monetary stance in the advanced economies has put pressure on the global financial structure that tethers on complete collapse.

Usui said by cutting the rate on special depository accounts, Philippine monetary officials have effectively put up another sign that the country was treading “on a very sensitive” path. “Money is all parked in SDA. By cutting the SDA rates, banks should more probably expand their lending into the real sector.”

But Usui added that if that short-term expected effect doesn’t push through, “the question remains on how to use that money in the SDA.”

“If that isn’t answered, short-term macroeconomic stability issues will have for monetary officials difficulties [in maneuvering].” –Dennis D. Estopace | Reporter, BUsinessmirror