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- Category: Top News
- Published on Thursday, 31 January 2013 21:32
- Written by Bloomberg News
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said that he is studying more measures to counter excessive capital inflows lured by growth, joining South Korea and Singapore in warning that policy- makers need to consider more steps to reduce the impact of such funds.
“Capital flows and the impact of these on the local economy and local financial markets” would be among the biggest challenges this year, Tetangco pointed out in an interview in his office on Wednesday.
“We continue to study what other measures can be implemented just in case there’s a need to adopt more measures in the future.”
Monetary easing in developed nations from Japan to the US and Europe has spurred flows to faster-growing emerging markets as investors seek higher returns, boosting Asian stocks to the highest in 17 months this week. The BSP can’t rule out further reductions on the rate it pays on funds placed in its special deposit accounts after a cut last week, Tetangco said.
“It’s becoming challenging to manage inflows with so much of it coming in and increasing liquidity in the system,” said Santitarn Sathirathai, a Singapore-based economist at Credit Suisse Group AG. “What the central bank doesn’t want is for these funds to go into speculative activities, like to the property sector.”
Singapore central bank Managing Director Ravi Menon said also on Wednesday that Asian policy-makers should allow a gradual appreciation of their currencies along with other measures to keep inflationary pressures contained as the region faces a “wall of money.” South Korea should consider taxes on currency trading and bonds to help limit “speculative” inflows of capital, Deputy Finance Minister Choi Jong Ku said on the same day.
Thailand will set up a team of economists, including central bank Governor Prasarn Trairatvorakul, to study how to respond to short-term capital inflows, Finance Minister Kittiratt Na-Ranong said also on Wednesday. The country will not impose capital controls or tax measures to curb fund flows, he added.
Interest rates will remain low this year even as growth will probably meet the government’s 6-percent to 7-percent target, Tetangco said.
“From our point of view, we do not see signs of overheating in the Philippine economy,” the BSP governor added.
The BSP in 2012 announced limits on banks’ currency forward positions and banned overseas funds from special deposit accounts. Last week, it cut the rate it pays on P1.72 trillion ($42 billion) in its so-called SDAs to 3 percent from more than 3.5 percent. The central bank kept the benchmark overnight borrowing rate unchanged at a record-low 3.5 percent.
“By introducing more macro-prudential measures, they’re able to target specific concerns unlike using the main interest rate, which is a blunt tool,” Santitarn said.
Philippine outsourcing companies have called on policy-makers to curb the peso’s gains to sustain competitiveness. Inflows must be managed as currency gains may hurt exporters and low rates may spur asset bubbles, New York University Professor Nouriel Roubini, also an economist, said in a speech in Manila also on Wednesday.
Bloomberg News
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