Government economic managers have updated their economic assumptions for the year, taking into account the latest developments in other countries that are expected to affect the flow of funds into the Philippines.
Bangko Sentral Deputy Governor Nestor Espenilla Jr., speaking before the Security Bank economic forum in Makati Friday night, said the new economic forecasts were made in consideration of the developments in the Middle East and North Africa as well as the crisis in Japan.
The government sticks to its gross domestic product growth forecast of 7 to 8 percent and inflation target of 3 to 5 percent for both 2011 and 2012 but now sees remittances and exports growing slower than earlier expected.
“Is low and stable inflation sustainable? I believe our answer would have to be yes, barring unforeseen surprises. The Bangko Sentral has the tools in its toolkit and has shown it is responsive and flexible,” he said.
These new forecasts in turn translated into a lower balance of payments surplus projection of $6.7 billion, compared with the previous estimate of $6 billion to $8 billion for 2011. For 2012, a slimmer BoP surplus of $4.4 billion was assumed.
The gross international reserves are expected to hit $70 billion in 2011 and $75 billion in 2012.
The country’s BoP posted a record-high surplus of $14.4 billion in 2010, with a sustained current account surplus since 2003. This pushed the GIR to a record $66.2 billion at the end of March, eclipsing the country’s foreign debt placed at $60 billion as of end-2010.
What could help the Philippines enjoy a BoP surplus is the surge of foreign portfolio investments. In the first quarter of the year alone, these investments, also known as hot money because of the great speed at which they are invested in or pulled out from the market, amounted to $973 million, up 150 percent from $385 million year-on-year.
Remittances, the traditional source of external strength for the Philippines, showed a sluggish growth in the first two months. From the original forecast of 8- percent growth for remittances in 2011, the economic managers now expect the inflow to rise at a slower rate of 7 percent to $20.1 billion in 2011 and 5 percent to $21.1 billion in 2012. –Roderick T. dela Cruz, Manila Standard Today
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