PH will ‘shine through’ crisis

By Mia A. Aznar

Monday, August 22, 2011

DESPITE “strong” signs of a double dip recession looming for the United States and declining global markets as a result of the US ratings downgrade, an investment officer is confident the Philippines will “shine through.”

Sunlife Financial’s chief investment officer Michael Manuel told participants of the CEO and Entrepreneur’s Forum last Friday that the country has a strong foundation, with enough dollars to pay for its dollar debts.

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While he described the economies of the US and Europe as “muddling through,” he said Asian markets are, in contrast, growing at a fast rate.

The only effects he foresees the US downgrade will have on the Philippines is “from a confidence perspective.” Still, he said the country has a strong foundation.

He noted that while huge drops were felt in foreign markets, the Philippines experienced small dips.

Recovery

Manuel acknowledged that there will be ups and downs, but believes the downs will be short while the recoveries will be quick.

He noted that when the markets in the US dropped five percent, the Philippines only dropped 1.4 percent.

“The Philippines is shining through in a very ugly global market,” Manuel said, adding that the only other market doing as well as the Philippines is Indonesia. He pointed out that the Philippines has gotten three ratings upgrades from since 2010 while Indonesia has been upgraded nine times in the last two years.

He cited the strong OFW remittances, which hit $1.7 billion last June, when many thought it would drop due to the slow economic performance of global markets.

As for international reserves of the Bangko Sentral ng Pilipinas, Manuel said it has reached $70 billion.

“The market is flooded with pesos,” he said, pointing out that there are P2 trillion in special deposits accounts and P5 trillion to P7 trillion in deposits.

Of these figures, Manuel said banks have only lent out 60 percent. “There is so much cash in the banking sector.”

This situation, he said, makes it different from the Asian financial crisis in 1997.

When the global financial crisis hit in 2008, most global economies went down but the Philippines was not as badly hit. Many expected remittances to go down 10 percent but instead, rose to 15 percent.

“Today, there is so much money, we can rely on our internal capacity to support our economic growth,” Manuel said.

He said the peso could even be stronger than its current rate, if not for the BSP buying dollars.

Buying dollars

He said that if the BSP was not buying dollars, the exchange rate could be at least P40 to the dollar. He explained the BSP is trying to help exporters and families of OFWs adjust by buying dollars to put value to their incomes.

He doubts though if the BSP can keep buying dollars to save these sectors. For now, he says it will all depend on the government’s economic policy.

As for the US, Manuel said the possibility of their economy going into a double dip recession is big.

He noted that while they tried to devalue the dollar to gain a trade advantage over China, US exports only account for nine percent of their economy. Manuel said they cannot rely on exports alone to grow their economy.

Manuel said 20 percent is dependent on the US Government while 70 percent is from the private sector.

Published in the Sun.Star Cebu newspaper on August 23, 2011.