THE governor of the
central bank, Bangko Sentral ng Pilipinas (BSP) chief Amando M. Tetangco
Jr., hinted broadly of new measures eyed against the influx of foreign
capital that tends to unsettle the peso, the region’s least volatile
currency.
Tetangco
bared the unspecified measures at a public forum hosted on Tuesday by
the Foreign Correspondents Association of the Philippines where he also
said the high-flying 6.4-percent growth in the first three months may
not be sustained down the line.
“If there are cases
that require additional measures, we would consider those and pursue if
appropriate,” Tetangco said at the question-and-answer portion of the
proceedings.
This
remark came in the wake of refinements in the pricing and conduct of the
BSP’s special deposit account (SDA) operations and the higher capital
charge of 15 percent on the non-deliverable forward (NDF) transactions
to help moderate the flow of foreign capital.
“The
volumes of our NDF and SDA transactions have reached levels indicating
that the capital inflows into the country have become more speculative
than structural, given global investors’ search for yield,” he said.
“We
are mindful of this tendency to search for yields in various asset
markets… as often, this raises the risk if asset price bubbles, which
can also potentially undermine financial stability,” Tetangco said.
While
the peso is considered the least volatile among peers in the region
with only a 1.4-percent volatility rate, the currency’s value has risen
by some five percent from year to date to P41.931 at the Philippine
Dealing and Exchange Corp. or 2.3 centavos weaker than on Monday.
Tetangco
would not reveal the measures the BSP has in mind, noting only the
alacrity by which foreign funds enter and exit the country.
“We have remained vigilant against sudden stops and abrupt reversals that can threaten the real economy,” he said.
Portfolio
flows, more known as “hot” or speculative money, totaled $871 million
in the first half this year, reflecting the risk-on, risk-off attitude
of fund managers in keeping with what is happening around the world,
particularly in debt-ridden Europe and the United States hounded by
growth problems.
Nevertheless, Tetangco said the Philippines remains resilient, claiming “our growth dynamics appear to be self-sustaining.”
He expects domestic demand to continue to drive real sector activity over the next few months.
Tetangco
said the country’s favorable debt profile and ample dollar reserves
“reflect the country’s robust external payments position.”
“Third,
the healthy banking system continues to support domestic activity and
serve as an effective channel for monetary transmission,” he said.
Tetangco
vowed to “continue building up these buffers and ensure that
appropriate policy measures are in place to address the remaining
potential threats to the economy.”
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