The PH world rank in financial promo

Philippines ranks 2nd in Asia, 8th worldwide for financial inclusion promotion

By TED CORDERO
GMA News
December 18, 2020

The Philippines remains among the top leaders in financial inclusion, according to the 2020 Global Microscope on Financial Inclusion of the Economist Intelligence Unit (EIU), the research arm of The Economist Group.

The country ranks second in Asia, next to India; and eight worldwide, tied with Brazil, in the EIU study, which assessed the financial inclusion environment in 55 countries.

The EIU study rated countries across five dimensions, namely Government and Policy; Stability and Integrity; Products and Outlets; Consumer Protection; and Infrastructure.

Together with Thailand and Russia, the Philippines posted the highest improvement in Asia and Eastern Europe, in view of the government’s push to promote digital channels as part of its responses to the COVID-19 pandemic, according to the study.

The Philippines got a perfect score of 100 points in Products and Outlets dimension, which covers Bangko Sentral ng Pilipinas (BSP) regulations on e-money, simplified accounts like the Basic Deposit Account (BDA), and financial outlets such as cash agents.

Focusing on the role of financial inclusion in the COVID-19 response, the EIU study recognized the initiatives of the Philippines to mitigate the adverse economic impact of the pandemic.

The report cited the regulatory relief measures of the BSP to ease liquidity constraints in the financial system, restore business confidence, and sustain the flow of credit amid the unprecedented health crisis.

These include the temporary relaxation of compliance to reporting requirements, easier access to rediscounting facility, and waiver of licensing fees and charges for financial institutions setting up their electronic payment and financial services.

It also cited the initiative of financial service providers to suspend fees for electronic fund transfers during the community quarantine period.

In addition, the EIU report highlighted measures to promote MSME financing such as allowing banks to include loans granted to MSMEs as alternative compliance with reserve requirements, reducing the credit risk weight of MSME loans that are current in status to 50% from 75%, and reducing the minimum liquidity ratio (MLR) for stand-alone thrift banks, rural banks and cooperative banks to 16% from 20% until end-December 2020.

While the Philippines scored lowest in the Infrastructure dimension with 69 points, there is noted improvement from last year’s level owing to ongoing initiatives on digital connectivity, digital identification, and digital payments infrastructure.

The report emphasized the importance of digital infrastructure that includes access to identification, mobile phones, and financial accounts to facilitate efficient delivery of cash assistance to vulnerable segments.

It also noted that better data integration is needed for proper targeting of cash aid program beneficiaries.

The Global Microscope is an annual cross-country assessment of the enabling environment for financial inclusion. Since 2009, the Philippines consistently belongs to the top-ranked countries in terms of having a supportive framework for inclusive finance.

Latin American countries namely Colombia, Peru, Uruguay, Argentina, and Mexico dominated the top five spots of 2020 Global Microscope. —KBK, GMA News

...the fintech and digital awardee

Union Bank of the Philippines bags prestigious fintech and digital awards, 3 years running

Media OutReach
08 October 2019

SINGAPORE – Media OutReach – 8 October 2019 – Union Bank of the Philippines (UnionBank), with its vision of transforming into “A technology company, also a bank,” recently made waves as its top executives won big at the Singapore Fintech Awards 2019. 

UnionBank Chairman Justo A. Ortiz and Senior Vice-President and Fintech Business Group Head Arvie de Vera each won the Asia Fintech Leaders Award which recognizes remarkable leaders across the region for their continuing commitment to excellence, developing best practices and pursuing innovative strategies.

The Awards aims to highlight those across Asia who have made extraordinary contributions to the fintech industry’s meteoric rise on the global stage. Indeed, Ortiz and de Vera have been making strides globally, advocating for smart banking as a way to realize the bank’s purpose of elevating lives, fulfilling dreams and enabling communities. 

The Awards were hosted by the Singapore Fintech Association, while the rigorous judging process was helmed by none other than PwC Singapore. 

The winners were announced at a Gala Night graced by Ravi Menon, Managing Director of the Monetary Authority of Singapore (MAS) and Minister Ng Chee Meng, Secretary-General of the National Trades Union Congress (NTUC) of Singapore. 

In addition, UnionBank also won, for the third year in a row, the Best Digital Bank — Philippines award at the Asiamoney Best Bank Awards 2019 in Singapore on September 25. Asiamoney also identified UnionBank as one of 30 financial institutions to watch out for in Asia, and among 5 on its radar for digital banking. 

In awarding the bank for the third year straight, Asiamoney considered the long list of innovative initiatives UnionBank is pursuing, some of which include the first fully digital branch The Ark, a tokenized fiat cross-border transaction pilot from OCBC Bank in Singapore to a rural bank in the Philippines, and the country’s first central bank-compliant two-way virtual currency ATM among many others.

...the continous PH economic growth

Fitch keeps PH growth projection at 6.1%


Mayvelin U. Caraballo
Manila Times
11 September 2019


FITCH Ratings has maintained its 6.1-percent growth forecast for the Philippine economy this year as it expects it to bounce back in the second half.

Workers are busy at a construction site in Quezon City. PHOTO BY RUY MARTINEZ

In a report released on Tuesday, the global credit ratings agency said the figure kept the country among “the fastest-growing economies” in the Asia-Pacific region.

The projected figure falls within the government’s downwardly revised 6- to 7-percent gross domestic product (GDP) growth target range.

Fitch also said it “expects growth to improve in 2H19 [second half of 2019] following a weak first half. Growth was weighed down by the delay in budget implementation and a weak external environment.”
The government earlier reported that the country’s GDP expansion slowed to 5.5 percent in the second quarter, bringing growth in the first half of the year to 5.5 percent.

A dispute between the Senate and the House of Representatives over alleged insertions resulted in the four-and-a-half-month delay in the passage of this year’s budget. This forced the government to run on last year’s outlay, limiting it to spend for items detailed in the 2018 appropriations and not on programs and projects supposed to be implemented this year.

Fitch also believes that the tight monetary policy and slowing growth momentum last year “have lowered overheating risks” for the economy.

The Bangko Sentral ng Pilipinas implemented a cumulative rate hikes of 175 basis last year, when the country’s economic growth slowed to 6.2 percent from 6.7 percent in 2017.

On the country’s average inflation rate, the debt watcher expects it to slow to 3.1 percent this year from 5.2 percent in 2018.

Its inflation forecast fell within the 2- to 4-percent official target range of the government, but was higher than the 2.6-percent forecast of the central bank.

Year-to-date average inflation rate now stands at 3.0 percent following the three-year-low 1.7-percent print in August.

...the Asia's best currency in February 2019

Philippine Peso Surprises to become Asia's Best Currency 

David Finnerty

Bloomberg| 03March 2019

The Philippine peso has defied a yawning current-account deficit to emerge as Asia’s best-performing currency in February. And it may continue to surpass its peers.

Peso bulls say record remittances, rising investment and a buoyant domestic economy will propel further gains in the currency. Easing inflation could also lend a hand, as higher real yields burnish the appeal of Philippine bonds.

The peso is among Asia’s biggest turnaround stories, as the currency bounced back from a 13-year low after a slew of economic reforms and a $170 billion infrastructure spending plan revived sentiment. Proactive central bank policy has also helped win over skeptics.

“The peso has been stronger recently and could continue to outperform in the region, amid sustained net foreign portfolio investments on a widely expected further declining trend of local inflation," said Mike Ricafort, economist at Rizal Commercial Banking Corp. in Manila.

The Philippine currency strengthened 0.8 percent in February to 51.70 per dollar, the best performance among Asian currencies. It has climbed since the start of the year, as a pause in Federal Reserve tightening and easing global trade tensions fueled demand for developing-nation assets.

The peso was among the hardest hit in the emerging-market sell-off last year, tumbling to a 13-year low of 54.41 in October as investors punished economies running current-account deficits.

Technicals back the case for further peso gains. The dollar-peso currency pair remains in a bear trend, hovering above initial support at 51.90, its Feb. 13 low. The pair’s slow stochastics, a momentum indicator, signals it may drop further in the near term, with the %D line reading 43 and falling.

Sentiment toward the peso has recovered even after the central bank forecast the nation’s current-account deficit will widen to 2.3 percent of gross domestic product in 2019, the biggest shortfall since 2001. The recent rebound in crude prices threatens to worsen the gap, as the Philippines imports almost all its oil requirements.

Investors are betting on the peso after foreign investment into Philippine stocks and bonds recorded a net inflow of $763 million in January, more than four times the level a year ago. Remittances from Filipinos working abroad climbed to an all-time high of $2.85 billion in December.

Inflation data due March 5 could provide more fodder for peso bulls. Consumer-price gains may have eased to a one-year low of 4.0 percent in February, according to a Bloomberg survey of economists on Friday afternoon, and within the central bank’s target band of 2 to 4 percent. Price pressures have waned since touching a nine-year high in September, thanks to government measures to boost food supplies.

This augurs well for peso government bonds, which gained 0.4 percent in February, the seventh-best performer among 34 sovereign markets tracked by Bloomberg. Waning price pressures will boost real yields on Philippine debt, particularly as the central bank remains in hawkish mode for now.

Ten-year peso bonds offer a real yield of 2 percent, compared with about 5 percent for Indonesian securities and Indian debt.

But for peso bears, the outlook is less certain.

“Peso outperformance is unlikely to persist," said Divya Devesh, head of Asean and South-Asia FX research at Standard Charted Bank in Singapore.

— With assistance by Ditas B Lopez, and Masaki Kondo

...the PH global banks

8 Philippine banks make it to global rankings list

By Doris C. Dumlao
inquirer.net
12 September 2014

The SM group’s banking arm BDO Unibank Inc. has kept its bragging rights as the Philippines’ top bank in the Top 1,000 Global Banks Ranking 2014 report of British publication The Banker.

BDO, which placed 268th in the latest ranking, led the roster of eight Philippine banks that landed on the global list.

The seven other Philippine banks that made it to the list were Metropolitan Bank and Trust Co. (314th), Bank of the Philippine Islands (382nd), Philippine National Bank (506th), Rizal Commercial Banking Corp. (590th), Security Bank Corp. (680th), China Banking Corp. (681st) and Union Bank of the Philippines (751st).

The banks were ranked by The Banker on the basis of strength of their tier1 or core capital, assets, performance and earnings.

Globally, most of the banks in the top 10 were either from China or the United States, with the exception of one British (HSBC) and one Japanese bank (Mitsubishi UFJ). The top five banks globally were ICBC (1st), China Construction Bank (2nd), JP Morgan Chase (3rd), Bank of America (4th), HSBC (5th), Citigroup (6th), Bank of China (7th), Wells Fargo & Co. (8th), Agricultural Bank of China (9th) and Mitsubishi UFJ Financial Group. (10th).

The Banker’s Top 1000 World Banks ranking has been setting the industry benchmark since 1970, providing comprehensive intelligence about the health and wealth of the banking sector. The report enables investors and clients worldwide to assess the strength and weakness of the banks, identify banking partners for the future and track the big movers and new arrivals in the sector.

 

...the Asian miracle

PH is more than ‘Asian miracle’–BSP

 

Manila Bulletin – Mon, Jun 2, 2014

The Philippines is prepared to take on the risks and challenges of transforming the ASEAN trade grouping into an integrated, powerful economic community, opined Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr.

 

While his words are echoes of past pronouncements, Tetangco reiterates though that the economic growth of the last eight quarters – consistently above six percent GDP -- is not something he would describe as a miracle.

During the recently held World Economic Forum on East Asia, which the Philippines hosted for the first time, foreign officials, delegates, and investors have commonly referred to the country as an Asian miracle, a term Tetangco said may not be appropriate.

“Many during the WEF (called) the Philippines a country turning the tide from being the sick man of Asia to the next Asian miracle. To be perfectly frank though, I do not relish that we are called a miracle,” said Tetangco before a gathering of the country’s retail investors and financial analysts.

“The evidence will show that we are where we are now because of hard-fought reforms.”

In the region and across its ASEAN peers, the Philippines remains one of the fastest growing economies. The first quarter GDP growth of 5.7 percent, although falling short of consensus estimate of six percent, is third highest in GDP rate after China and Malaysia.

“Analysts have described the Philippine economy as being in the ‘pink of health’ and this rosy picture is expected to continue through 2014-2015,” said Tetangco. Consumption and capital formation, he said, continue to be the main drivers of growth.

“Our growth story has been underpinned by solid anchors – low and stable inflation due to credible monetary policy and a sound banking system maintained through responsive regulation,” he said. Inflation has remained within target for five consecutive years.

Tetangco also pointed out that local banks continue to be well-capitalized with a capital adequacy ratio of well above the 10 percent requirement and the standard eight percent by the Banks for International Settlements.

“Likewise the adoption of Basel 3 in 2014 is expected to strengthen further the financial system,” he said.

Tetangco said the healthy external sector position continue to shield the economy and the domestic financial market against financial market volatilities after the US Federal Reserve commenced its tapering move last year.

With the US Fed taper of asset purchases in place, markets are now watching developments in growth and unemployment in the US, to see if the Fed will change the perceived path of the taper, and when the “lift-off” (or when Fed would raise rates) would be, observed Tetangco.

“In this period of uncertainty and market volatility, good surveillance is key,” he stressed. “The BSP will not hesitate to deploy contingency measures in response to sharp volatility in capital flows. With an expanded monetary policy toolkit and a broad-range of macroprudential measures to help ensure financial stability, we are optimistic that we are equipped to deal with potential market volatility.”

In the meantime, the country’s favorable external sector dynamics has improved external liability management. The current account has been in surplus for 11 consecutive years.

The favorable sentiment is a positive multiplier, said Tetangco. “Both consumers and businesses continue to express upbeat views about the Philippine economy's growth trajectory,” he added. The positive sentiments are indicative of the “broad support to the general direction of economic policies, and this is expected to fuel the momentum of reforms moving forward.”

With sustained positive developments in almost all sectors of the economy, the outlook in 2014 remains upbeat.

“We are optimistic that GDP growth will reach the government’s growth target of 6.5 to 7.5 percent for the year,” said Tetangco. He is also confident inflation will settle within the three percent to five percent target for the year.

“External sector dynamics will remain favorable, as trade is expected to rebound in light of expected global turnaround while remittances are seen to remain on a steady growth path,” the BSP chief said.

 

...the PH new upgrade

Phl due for new upgrade – BSP

              

By Kathleen A. Martin

The Philippine Star

 March 12, 2014

 

 

MANILA, Philippines - The Philippines may get a further credit rating upgrade as early as this year on the back of the economy’s rosy prospects, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said yesterday.

“Given that one of the credit rating agencies has given us a positive credit outlook and given that Fitch (Ratings) will also provide some positive review after they came here, it’s possible that we can have another upgrade,” Guinigundo said.

The Philippines enjoys investment grade ratings from the world’s three major credit rating agencies which all cited the strong growth achieved by the economy, improved governance, and structural reforms being put in place by the current administration.

Guinigundo said Fitch has already concluded its annual visit and assessment of the country last month. The other two rating agencies are expected to conduct their reviews within the first half of the year.

Fitch in March last year upgraded the country’s credit rating to ‘BBB-’ with a stable outlook from junk, while Standard & Poor’s in May gave the Philippines a ‘BBB-’, also with a stable outlook.
Moody’s Investors, delivered its Baa3 in October with a positive outlook.

The positive outlook means another upgrade may be on the horizon for the country in the next 12 to 18 months, Guinigundo said.

Guinigundo said that the Philippines is deemed “better” than other similarly-rated or higher-rated countries in the region.

“In fact there are many higher-rated jurisdictions in Asia but we enjoy a lower debt spread and lower CDS (credit default swap) spread which means the market already priced in a possible upgrade,” Guinigundo said.

“It can also be a recognition that risks are much lower in the Philippines because of the good macroeconomic fundamentals,” he added.

The economy expanded by 7.2 percent last year, while inflation averaged three percent. The country also boasts of a balance of payments surplus and a sound banking system.

“Our external to GDP (gross domestic product) ratio has also been coming down significantly in the last 10 years not only because the economy has expanded in the last 10 years but also because the national government has been prepaying its debts,” Guinigundo explained.

“Remember that in the past, this was the issue, the challenge of the Philippine economy – reducing the debt to GDP ratio,” he added.

 

...the PH economy by 2015

Philippine economic growth to outpace China in 2015, says Credit Agricole

By: Maricel E. Burgonio,
InterAksyon.com
January 9, 2014

 

MANILA - While it would slow down this year, the Philippine economy will outpace China and the rest of Asia next year, according to Credit Agricole.

In a report, the multinational investment bank said the Philippines' gross domestic product (GDP) will grow at a slower 5.7 percent this year from last year's estimate of 6-7 percent.
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GDP is the amount of final goods and services produced in the country and as such measures economic performance.

But by next year, the Philippines will get back its groove, with GDP seen growing 7.3 percent amid the reconstruction of areas devastated by Typhoon Haiyan (local name: Yolanda).

“Gradually, the post-Yolanda reconstruction will begin to add to growth, and by 2015 the economy will again be running on all cylinders, growing 7.3 percent – above the Chinese level and the most in Asia [excluding] Japan," Credit Agricole said.

The investment bank expects remittances, which has fueled the 5-7 percent growth in household consumption in the last three years, to contribute as much this year.

It also sees government consumption, which expanded 12 percent in the last two years, to rebound as the calamity reconstruction takes off.

Inflation to pick up

With robust growth, inflation is expected to pick up to four percent this year from the estimated 3.1 percent average in 2013.

“The BSP is trying to look through the faster price gains, hoping that they represent a one-off, but will have to be mindful of the potential for pass-through,” Credit Agricole said, referring to the Bangko Sentral ng Pilipinas.

Credit Agricole said the BSP is faced with "a tough task of managing the ripple effects" of the US Federal Reserve's decision to withdraw its economic stimulus.

"We anticipate significant outflows of portfolio capital from the Philippines, which will reduce the availability of funding needed for growth," Credit Agricole said.

100 basis points hike in interest rates

Given this, the BSP would hike its interest rates to a total of 50 basis points starting in the middle of this year, followed by a similar amount next year.

“We expect the BSP to maintain such a policy in [first half of this year]. At the same time, we expect the Philippines to stand out in terms of growth and monetary tightening, and to maintain a solid current account surplus," Credit Agricole said.

With policy tightening this year, the peso is expected to rebound to P43 against the US dollar, allowing the local currency to become one of Asia's best performing. For 2015, the peso is seen to average P42 to the dollar.

 

...the strong PHL economy

Phl can weather volatility – int’l banker

              

By Kathleen A. Martin

The Philippine Star

August 26, 2013

MANILA, Philippines - The Philippine economy is strong enough to weather the market volatility being experienced by its neighbors in the region, an economist of global investment bank ING said over the weekend.

“The Philippines is less vulnerable to contagion than its SE (Southeast) Asian neighbors because it has a stronger external payments position,” Tim Condon, ING’s chief economist for Asia, said in a research note.

At the same time, he noted “(Remittances from abroad) sustain a comfortable current account surplus and the trade deficit is narrowing.”

Condon said the country will not be a source of crisis in the region but it may not be spared from a contagion if a balance of payments (BOP) crisis breaks out.

“The Philippines is not going to be the source of a balance of payments crisis. However, if a BOP crisis breaks out elsewhere, the Philippines won’t be spared, no economy in Asia excluding Japan would,” Condon said.

The BOP shows a country’s transactions with the rest of the world. Its components include remittances, exports and imports, and investments, among others.

Aside from problems experienced by the region, capital flight in emerging markets is also being driven by the US Federal Reserve’s impending tapering of its massive bond buying program.

 

“The combination of investors’ worries on some emerging markets’ economic numbers and the expected withdrawal of the US Fed monetary stimulus are working against emerging markets,” Antonio C. Moncupa Jr., president of East West Bank, said in a separate comment.

“If this continues, interest rates, not only in the US but likewise in emerging markets maybe adjusted upwards. The latter as a defense against deteriorating currencies,” he continued.

Moncupa said that while the Philippines’ macroeconomic fundamentals remain strong, the country may still see volatility due to what’s happening in the region.

“While arguably, the Philippines is in a better position than many emerging markets, I guess this is a case of low tide grounding most ships. But ships that are in better condition should refloat when the tide turns, as it would,” Moncupa said.

“In the meantime, it would seem that volatility will be with us,” he added.

 

...the PH economic forecast (by StanChart)

PH economy to grow 8% by 2015 - StanChart

 

 

By Prinz P. Magtulis,

The Philippine Star

08/02/2013

 

 

“There is no reason why the Philippines could not start growing faster than China,”  - Marios Maratheftis, global head of macro research at Standard Chartered Bank

 

 

MANILA, Philippines - The Philippines could begin growing by more than eight percent in 2015 and sustain that even onto the next administration given the correct policies and strong fundamentals driving investor confidence now, a top executive of a global investment bank said yesterday.

“There is no reason why the Philippines could not start growing faster than China,” Marios Maratheftis, global head of macro research at Standard Chartered Bank, said in a briefing.

“The country is moving into the right direction. There is no reason why the Philippines will not grow by eight percent plus by 2015,” he added.

The statement compares with Standard Chartered’s official forecast of seven percent growth by 2015.

 For this year and next, the economy is expected to expand by 6.9 percent and 6.3 percent, respectively.

The Aquino administration has set the following medium-term growth targets: six- to seven-percent this year, 6.5-percent to 7.5-percent next year, seven- to eight-percent by 2015 and 7.5- to 8.5-percent by 2016.

According to Maratheftis, the “positive story” of the Philippines has reverberated across the world given that “right plans,” especially on infrastructure, are in place. The bank also credited the public-private partnership (PPP) initiative.

In a report dated July 1 but released yesterday, Standard Chartered said low interest rates and a “flush of liquidity” will help finance PPP projects, of which only three have been successfully awarded since its launch in November 2010.

The awarding of investment grade status could also boost foreign direct investments (FDI) — tagged as the missing link to the country’s success story. Maratheftis noted that “strong confidence” in the Philippines from corporations globally.

“FDI will eventually catch up. There is a lot of room for Philippines to catch up,” Maratheftis said.
“If you have the three drivers of growth: correct policies, strong fundamentals and confidence, it will be difficult to isolate one over the other,” he pointed out.

A recovery in the US would also work on the country’s favor, the official said, noting that the Philippines is “most sensitive” to developments in the world’s largest economy. Among others, trade and FDI gains are expected once the US fully recovers.

For his part, Steve Brice, the bank’s chief investment strategist, said it would be important for the government “not to become complacent” despite all its laurels.

Growth, he said, will need to be sustained by ensuring public projects are bid out accordingly and in time.

Brice also said there is a need to create more channels for investments to keep the Philippines on the radar screen. On the local bourse for instance, he said “a lot of money chasing limited assets” have caused valuations to ratchet up relative to our neighbors.

“Valuations are really high. It’s a challenge for the market. But we always believe on the structural rerating story,” Brice told reporters.

“You would expect earnings to grow up faster here than in the US against this backdrop (of strong growth),” he added.

On the property market, Brice said the market is seen to remain “relatively buoyant,” with slight correction on prices in the future owing to huge supply coming in. “But we don’t expect it to slump back dramatically.” – With Ted Torres

...the PHL banks

PHL banks stand out for having positive outlook — Moody's

GMA News

July 18, 2013

 

 

The Philippines, however, is “unique among Moody's system globally” for having a positive outlook, which means that the system can be upgraded. 

 

 

The credit outlook for the Asia Pacific region remains stable despite perceived global economic slowdown and volatility in financial markets, with Philippine banks standing out as exceptional, debt-watcher Moody's Investors Service said Thursday.

“Looking ahead, sovereign ratings in the region are likely to withstand the effects of the moderation in global demand and the volatility in global capital markets,” Moody's said in its special report, “Asia-Pacific 2013 Sovereign Mid-Year Update: Broad Regional Stability Amid Continuing External Volatility.”

Specifically, outlooks for banking systems are stable in nine out of 15 rated systems in the Asia-Pacific.

The Philippines, however, is “unique among Moody's system globally” for having a positive outlook, which means that the system can be upgraded.

Hong Kong, Mongolia, and Singapore have been revised to negative this year.

“Although we do not expect banking system stress to materially affect sovereign creditworthiness in these countries, there continue to be important channels of transmission,” Moody's said.

Moody's sees governments “running relatively tight fiscal policies, or continuing with gradual fiscal consolidation.”

Last year, Moody’s upgraded the issue ratings for the Bangko Sentral ng Pilipinas' debts to Ba1 or one notch below investment grade from Ba2 with a stable outlook.

It also upgraded the foreign and local currency long-term bond ratings of the Philippines to Ba1 from Ba2 with a stable outlook.

Moody's cited as one of the reasons for the stable financial system is that it posed limited contingent risks and provided a stable source of financing for the government.

A higher credit rating allows banks and governments to borrow for less.

The debt watcher noted that the region's debt as a percentage of its output is expected move up only slightly, averaging 49 percent for the 2011 to 2014 period from 47 percent in the pre-2008 financial crisis.

“Overall, Indonesia and the Philippines have featured the biggest improvements in terms of their percentile ranking,” Moody’s said.

“High economic growth, narrow fiscal deficits, and exchange rate appreciation have combined to lead to debt consolidation in both countries and have contributed to the upward trajectory in their ratings,” it added. — SOA/BM, GMA News

 

 

...the PH growth forecast 2013 (UBS)

UBS hikes 2013 PH growth forecast anew to 7%

 

ABS-CBNnews.com

06/12/2013

 

 

MANILA -- Global financial services firm UBS has again upgraded its 2013 growth forecast for the Philippines to 7%, following the faster-than-expected first quarter economic expansion.

"Spending ahead of the May mid-term elections and a boom in construction helped push real [first quarter] GDP growth to 7.8% on the year, handily surpassing expectations of circa 6%. We revise our 2013 real GDP growth forecast higher again to 7.0% from 6.3%," UBS said in a research note.

The bank previously hiked its Philippine economic forecast to 6.3% from 4.5% in May.

UBS noted "benign inflation, a current account surplus, a bullish government and a dovish central bank suggests Philippine policy settings are among the most likely in ASEAN-5 to provide insurance against downside risks to growth."

However, it pointed out a key risk to the country's growth story may be its "overly-low" rates that may be vulnerable to a rise in global rates or a sudden fall in the country's savings surplus.

For 2014, UBS has also hiked its Philippine economic forecast to 6% from 5.5%.

The slowdown from 2013 was owed to "slower government spending post elections and because we do not think the pace of expansion in construction - which we link to low interest rates - will be sustained."

The Philippine economy expanded by a stellar 6.8% in 2012 from a lackluster 3.6% in 2011.

 

...the stable currency

Asian economists see PHL peso more stable than peer currencies

SIEGFRID O. ALEGADO

GMA News

May 13, 2013

 

Despite the inflow of more portfolio investments as a result of the investment grade rating the Philippines received from Fitch Ratings and Standard & Poor's, the peso is expected to grow stronger at a more stable pace than other Southeast Asian currencies.

Analysts said the volatility, or unhealthy ups and downs, in the daily exchange rate will be kept on an even keel by central bank intervention coupled with the Philippines' healthy foreign reserves.

The Philippine unit is currently trading at the high 40 and low 41 per dollar, stronger than the 42 level it hovered at in the same period last year. It closed at 41.12:$1 last Friday.

DBS Bank Ltd. forecasts the peso gradually strengthening to 39.3:$1 by year-end, unchanged from its projection prior the March 27 and May 2 credit rating upgrades.

“Our optimism for the Philippine is based on the country’s strong international liquidity position,” DBS's senior currency economist in Singapore Philip Sung Seng Wee noted in an e-mail message to GMA News Online.

Philippines' foreign currency reserves stood at $84 billion as of March this year, more than double the $37.6 billion as of end-2008.

HSBC associate director for Foreign Exchange Strategy in Hong Kong Dominic Bunning sees the peso ending the year at 40.2:$1, compared with the British banking giant's 39.5:$1 projection late last year.

“While we do think that the upgrades will increase portfolio inflows for the peso, we do not necessarily think this will be excessively volatile for the currency,” Bunning said in a separate e-mail message.

As of April 26, foreign portfolio investments also known as hot money—given the ease with which they enter and exit economies—hit $1.954 billion, up 150 percent from $782.91 million a year earlier.

Hot money has been flooding Southeast Asian economies amid stuttering growth in the United States and the continuing financial crisis in Europe.

Local economists are worried that excessive flows could stoke the peso and threaten dollar-dependent sectors like exporters, business process outsourcing, and families that rely on remittances from overseas Filipinos.

Least volatile in Southeast Asia

Wee said the peso “is probably the one of least volatile managed floating exchange rates in Southeast Asia.”

He noted the peso's strength, unlike its Southeast Asian peers, “was not achieved with current account deficits, lower foreign reserves and higher external debt.”

Bunning sees the situation parallel to that analysis, saying “the Philippines retains a positive story which should ensure many flows are durable in nature.”

Currency analysts and traders, moreover, noted the central bank has been on guard against excessive portfolio flows and took steps to smooth out foreign exchange volatility in the past.

Citing the Bangko Sentral bias against a volatile peso, local currency traders who requested anonymity said the central bank buys dollars when the foreign exchange hits the lower 40 to-a-dollar to keep volatility in check.

“The CB (central bank) is not against currency strengthening. It's against excessive highs and lows and wants currency trades in a tight band daily,” a trader at a local bank said.

The central bank incurred a strained balance sheet after shielding the currency and the economy from the impact of large inflows of foreign portfolio investments, but currency analysts noted a benign inflation and good growth prospects provide room to tap policy tools.

“The central bank [has] more flexibility to cut [policy] rates, if it wants to, especially now that inflation eased to a 13-month low” of 2.6 percent, Wee said.

For his part, Singapore-based economist at Standard Chartered Jeff Ng said, “Near-term-wise, we think that the potential for further macro-prudential measures is likely to slow the pace of peso appreciation for now.”

The Bangko Sentral has dampened the appeal of interest yield by keeping it at record lows. Benchmark policy rates remained at 3.5 percent for overnight borrowing and 5.5 percent for overnight lending since last October.

It also slashed the yield on Special Deposit Accounts (SDA)—a tool to mop-up excess liquidity— thrice so far in the year to 2 percent from a premium over policy rates in January.

“Having already been cutting its SDA rate the BSP is actively managing its sterilization costs. This could continue in the future,” said Bunning, referring to savings made by the central bank on lesser SDA yields. — Graph used with permission from DBS Bank/VS, GMA News

 

 

...the 3rd PH credit upgrade

Japan agency upgrades Phl rating

 

By Prinz P. Magtulis

The Philippine Star

May 8, 2013

 

MANILA, Philippines - Japan’s official debt watcher has upgraded the country to investment grade.
Japan Credit Rating Agency Ltd. revised its credit rating for the Philippines to BBB- from BB+, up one notch. The rating has a stable outlook.

The upgrade followed similar actions from major credit raters, Fitch Ratings and Standard & Poor’s Ratings Services (S&P). Fitch raised the country’s sovereign rating last March, while S&P did it last week.

In its statement, JCRA noted the country’s “robust economic growth” achieved against the backdrop of “sound fiscal management.”

In particular, the Philippines is projected to grow “around six percent in the years to come” buoyed mainly by large remittances from overseas Filipino workers (OFW) which are driving domestic demand.

“Its current account remains in surplus backed by OFW remittances and business process outsourcing revenues,” the agency said.

This, in effect, the rating’s agency said would further strengthen the country’s external position through accumulation of foreign reserves that would “enhance resilience to external shocks.

 

The balance of payments – which summarizes all inflows and outflows in a particular economy – hit a surplus of $1.535 billion as of the first quarter, central bank data show.

It is expected to widen to $3 billion by year-end driven by remittances projected to grow by an average of five percent this year.

As of February, cash remittances are already up seven percent to $3.363 billion, figures showed.
“The country’s financial system remained sound,” JCRA said.

“Philippine banks remained well capitalized with their average capital adequacy ratio kept high at 19 percent as of end-September 2012 as against the 10-percent regulatory standard set by the Bangko Sentral ng Pilipinas (BSP),” it added.

In addition, the government’s balance sheet has remained in check, with the budget deficit at just 2.3 percent of economic output last year, lower than the 2.6-percent target.

Debts have also been managed well, JCRA said, pointing to successful efforts of lengthening debt payment terms and focus on borrowing in pesos to reduce foreign exchange exposure.

“The increase in the excise tax in tobacco and alcohol in 2013 may help expand revenues in the years ahead,” it explained.

Moving forward, the Aquino administration should set its sights in improving the country’s infrastructure by further “strengthening its tax base” to fund investment projects.

The BSP, for its part, should encourage further “deepening and diversification” of the financial markets to better utilize capital flows, JCRA explained.

“As the uncertainty persists over the prospects of the global economy, especially the European economy, JCRA will closely monitor its future developments and their possible impact to the Philippine economy,” the agency said.

...the world's best performing currencies

Peso is 3rd best-performing currency globally

By Prinz Magtulis

The Philippine Star

April 28, 2013

 

MANILA, Philippines - The peso remains one of the world’s best performing currencies, debt watcher Standard & Poor’s Ratings Services (S&P) said Friday.

The local currency ranked third globally, appreciating 25 percent in real terms from March 2007 to March 2013, according to the S&P report.

Only the Chinese renminbi and Singapore dollar outperformed the peso. The two currencies have strengthened 29 percent and 26 percent, respectively, from their levels six years ago.

The performance was calculated using the real effective exchange rate (REER), which measures the inflation-adjusted value of currencies versus a basket of other units from trading partners.

“No single member of the 27-member European Union and only one of the 34-member Organization for Economic Cooperation and Development is among the top 10 most appreciated currencies,” S&P noted.

Behind the peso, the Australian dollar ranked fourth, rising 23 percent from its 2007 level. It was followed by the Brazilian real, Colombian peso and Peruvian nuevo sol, which rose 22 percent, 21 percent and 19 percent, respectively.

Rounding up the list was the Russian rubble, which firmed up 18 percent, and Saudi riyal and Venezuelan bolivar, which both appreciated 15 percent, the report stated.

According to the Bangko Sentral ng Pilipinas (BSP), the peso has strengthened 6.8 percent versus the greenback last year. It closed at 41.22 to a dollar last Friday, up four centavos from the previous day.
In real terms, the peso increased its value by 6.5 percent versus currencies of trading partners, according to the BSP. “The peso lost external competitiveness in 2012,” it said.

Concerns have been raised against the continued appreciation of the peso, especially on how it trims the value of dollar export earnings and remittances from overseas Filipinos.

The BSP, for its part, has implemented various macro-prudential measures to temper capital inflows causing the peso’s strong performance.

Among others, foreign funds were banned in parking at special deposit accounts (SDA) last July. Interest paid on SDA - money of banks and trust departments with the BSP - were also slashed by 150 basis points this year.

Foreign exchange rules were also further liberalized this month to encourage more outflows and balance the inflows to prevent pressure for the peso to rise.