'Philippines resilient to external risks'
Philippine Star
12 may 2015
MANILA - The Philippines is expected to continue to hold up well to external headwinds as it has enough fiscal space to counter any global risks, Finance Secretary Cesar Purisima said.
Purisima said the country remains one of the region’s most resilient to external shocks due to its sound fundamentals that compare well with many regions in the world.
“We have built ample buffers that strongly position the Philippines to weather changes in the external environment. We are less vulnerable to external risks, but we will never be complacent,” Purisima said.
Purisima issued the statement amid fears the US Federal Reserve will raise interest rates by June or
September, its first rate hike since the financial crisis.
Countries that are still running large deficits are vulnerable to flight of capital if the US Fed raises rates sooner or more aggressively than expected. Some emerging markets are heavily reliant on foreign inflows to fund fiscal or current account deficits.
With higher US interest rates, corporations and banks that borrowed in dollars could face additional pressure if they don’t have matching revenues or assets.
Purisima said the Philippines has sustained current account surpluses that began in 2003 with foreign exchange reserves growing significantly on the back of steady remittance flows and a growing business process outsourcing industry.
Vulnerability to foreign exchange risk is tempered with the country’s heavy bias towards local currency. Interest payments have been locked at low rates with the country’s debt portfolio predominantly in fixed terms.
Apart from these, the ratio of the country’s external debt has dropped to 15 percent of gross domestic product (GDP) or 0.5 times the Philippines’ dollar reserves – one of the lowest levels in Asia.
Purisima noted that only four percent of external debt will be maturing within a year, reflecting an average residual maturity of over 11 years.
An improved export manufacturing sector has narrowed the trade deficit further easing balance of payment pressures.
September, its first rate hike since the financial crisis.
Countries that are still running large deficits are vulnerable to flight of capital if the US Fed raises rates sooner or more aggressively than expected. Some emerging markets are heavily reliant on foreign inflows to fund fiscal or current account deficits.
With higher US interest rates, corporations and banks that borrowed in dollars could face additional pressure if they don’t have matching revenues or assets.
Purisima said the Philippines has sustained current account surpluses that began in 2003 with foreign exchange reserves growing significantly on the back of steady remittance flows and a growing business process outsourcing industry.
Vulnerability to foreign exchange risk is tempered with the country’s heavy bias towards local currency. Interest payments have been locked at low rates with the country’s debt portfolio predominantly in fixed terms.
Apart from these, the ratio of the country’s external debt has dropped to 15 percent of gross domestic product (GDP) or 0.5 times the Philippines’ dollar reserves – one of the lowest levels in Asia.
Purisima noted that only four percent of external debt will be maturing within a year, reflecting an average residual maturity of over 11 years.
An improved export manufacturing sector has narrowed the trade deficit further easing balance of payment pressures.
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