Peso could rise, Manila says

BSP Governor Amando Tetangco Jr said there indeed was a good chance for FDIs to start growing substantially this year given the improving outlook of businesses on the domestic economy.

With the positive impact of FDIs on job creation and the growth of the economy, the central bank finds it prudent to accommodate the effects of investment inflow on the exchange rate.

“It is imprudent to go against the fundamental trend so we would, as before, accommodate some peso appreciation,” Tetangco told reporters.

He stressed, however, that the BSP would not be tolerant of appreciation pressures resulting from the excessive inflow of foreign portfolio investments, or “hot money”, which are short-term and speculative in nature.

“But we would also continue to maintain a presence in the [foreign exchange] market to curb excessive volatility in the exchange rate. We are watchful of market conduct and will implement further macro-prudential measures, including refinements of those we have already put in place, to keep excessive volatility in market prices in check,” Tetangco also said.

Gross FDIs to the Philippines as of November amounted to US$1.34 billion, up 6.8 per cent from $1.26 billion. Net inflow of FDIs reached $1.13 billion, up by 32 per cent from $853 million.

Officials attributed the higher FDIs to the country’s improving economic fundamentals, including faster economic growth, declining debt burden of the government and rising foreign-exchange reserves.