Amando Tetangco, governor of Bangko Sentral ng Pilipinas, seen in this Oct. 8, 2012 photo, said interest rates will remain low this year even as growth will probably meet the government's 6 percent-to-7 percent target. Amando Tetangco, governor of Bangko Sentral ng Pilipinas, seen in this Oct. 8, 2012 photo, said interest rates will remain low this year even as growth will probably meet the government's 6 percent-to-7 percent target. Photographer: Julian Abram Wainwright/Bloomberg
Bloomberg published "Philippines Joins Korea in Weighing Steps to Curb Inflows" also explained how would it affects the country's economy if left uncontrolled.
Philippine central bank Governor Amando Tetangco said he's 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 said in an interview in his office yesterday. "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 U.S. 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. Bangko Sentral ng Pilipinas 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."
The Philippine economy grew 6.8 percent last quarter from a year earlier, the government said today, beating the median estimate of 6.3 percent in a Bloomberg News survey. Gross domestic product increased 6.6 percent in 2012, it said.
Gradual Appreciation
Singapore central bank Managing Director Ravi Menon said yesterday 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 yesterday.
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 yesterday. The country won't impose capital controls or tax measures to curb fund flows, he said.
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 governor said.
New Limits
Bangko Sentral 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 1.72 trillion pesos ($42 billion) in its so-called SDAs to 3 percent from more than 3.5 percent. It 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 said in a speech in Manila yesterday.
"We don't see evidence of stretched market conditions at this point in time but we continue to monitor," Tetangco said. "We don't target a particular exchange rate. Our policy is the same; we won't go against the fundamental trend but reserve the right to step in the market to smoothen excessive volatilities as may be necessary."
Top Performer
Capital inflows have boosted Philippine stocks and helped make the peso Asia's best-performing currency in the past 12 months.
The peso climbed to 40.55 per dollar on Jan. 14, the strongest level since March 2008. It was little changed at 40.66 as of 10:15 a.m. in Manila, according to Tullett Prebon Plc. The yield on the three-year peso bonds fell to 3.29 percent this week, the lowest since September 2011. The main stock index climbed 0.6 percent today, extending a record high.
The $225 billion economy is on the cusp of an investment- grade rating, President Benigno Aquino said this month. That would attract inflows, Tetangco said yesterday.
The Philippines has the highest junk rating at Moody's Investors Service, Fitch Ratings and Standard & Poor's. S&P raised the outlook to positive last month and said an upgrade is possible in 2013 on improved governance and public finances.
Encourage Outflows
The Philippines may consider further loosening foreign- exchange rules to encourage outflows, Felipe Medalla, a member of the central bank's Monetary Board, told reporters yesterday.
"We're not thinking of imposing holding period for investments in stocks," Medalla said. "If at all, maybe on fixed income, because people who go to fixed income do carry trade. We're studying everything."
South Korea's finance official Choi said yesterday his government may further tighten restrictions on banks' currency forward positions. South Korea on Nov. 27 capped currency forward positions at 150 percent of equity for branches of foreign banks. The limit is 30 percent of equity for domestic banks.
Tools other than interest rates have to be used as emerging-market economies such as the Philippines try to curb volatility, sustain growth and keep prices stable, Tetangco said.
"The policy rate remains the main instrument of monetary policy," he said. "Over the long run, we may develop an interest-rate corridor. What we did last week was an intermediate step towards that. It's a medium-term objective."
Bloomberg
Hindi ko maintindihan bakit matakot tayo kung maraming pera papasok sa Pilipinas.. diba pag maraming pera ang saya? bakit e restrict ng Bangko Setral? iyan di ko alam hindi ko maintindiha.. may magagaling ba dito na pwedeng mag explain ng malinaw... kasi kung ako tatanungin, pag maraming pera.. masaya....
Ang coconut industry natin nakapag export ng marami pero mababa ang value ng Dollar, mababa lang din ang kinita ng exports
If the typhoon hit us again and destroy million agriculture will this effect the economy?
walang problema yan. bigay nyo sa akin ako gagastos. ahahahahahha.
sarap maraming pera wala namang ma gagastos kai waang plan kung anong pag gagastusan...
yes, that's right. the BSP should regulate certain measurements to curb up the inflows of the country. why? it will lead to economic overheat kung saan, pag maraming inflows like remittances at foreign investments like stocks and bonds, amounting to more than a country's economy can absorb then, it will lead to high inflation rate or higher commodity prices. same with the property bubble, pag mataas ang demand sa condo units and housing, meaning, may property boom at affordable ang mga prices. pero kapag once, umaabot sa point na sumobra, bigla nalang magkaka-crash.
it's ok naman to have more inflows kasi it will generate more the economy but hindi sa situation ngayon ng pinas.. dapat hinay-hinay lang kasi hindi pa kaya ng economy natin na mag absorb ng napakaraming cash inflows sa ngayon..
BUSINESS STUDENT HERE (major in finance)
bakit di nyo i invest sa mga probinsya yan lalo na sa mga infrastructures mostly tourism, power and electric generation, world class transportation, roads and bridges and manufacturing of goods na kayang mag supply ng raw materials ng certain provinces. mga tanga puro lang kasi sa maynila iniisip nyo.
build more infrastructures in the provinces especially in the far-flung areas.
E DI ARMASAN NA AGAD ANG BANSA,KOOO PROBLEMA PAGWALANG PERA PROBLEMA PARIN PAG MARAMI? ANO BAYAN,ANG DAMING DAPAT GASTUSAN.
Iyong sobra pera sa Bngko Sentral mag hire ang AFP May mga Engineer tayo at Industrial Designer, Chemical Engineer, Electronic Engineer at Programmer mag build tayo ng malakas na missile and Missile defense and air to air missile to protect our country and territory.
HI GUYS IM MEL 27 YRS OLD HIGHSCHOOL GRAD,SHARING MY GOOD TOUGHTS IN THIS NEWS
TO BETTER UNDERSTAND THE ISSUE OF SO MUCH MONEY HAS A DOUBLE EDGE IMPACT READ THIS,
Many developing countries have reaped handsome rewards from surging capital inflows in recent years. This is widely regarded as a very welcome phenomenon, raising levels of investment and encouraging economic growth. But surging capital inflows can also be something of a double-edged sword, inflicting rather less welcome and destabilizing side effects, including a tendency for the local currency to gain in value, undermining the competitiveness of export industries, and potentially giving rise to inflation. Why inflation? Capital inflows result in a buildup of foreign exchange reserves. As these reserves are used to buy domestic currency, the domestic monetary base expands without a corresponding increase in production: too much money begins to chase too few goods and services.
HOPE I GAVE BROADERVIEWS ON THIS ARTICLE,,
thanks mel... that's right.. in other terms, one of the principles of economics also suggests that, prices rise when the government prints too much money
Dapat mag intervene na ang government natin to reduce the high electricity cost.
Pera pera lang ang labanan sa Pilipinas. Patuloy pa rin ang greed sa pera ng maraming businessmen.
Ang FDI ng Pilipinas ay USD3.5 Billion pero ang Singapore USD115 Billion.
Hindi kasi nakinig noon si Fidel Ramos Kay Lee Kuan Yu. Yabang kasi ni Ramos, siya lang ang nagpayaman.
Ang mga leaders natin sila lang ang nagpapayaman at kinakalimutan nila ang mga nasasakupan nila.
Ang mga leaders natin both in government and in private sectors ay greedy talaga. Sila lang ang nagpapayaman at kinakalimutan nila ang mga nasasakupan nila.
Bakit nagawa ng Singapore, Malaysia, South Korea, Japan, Germany, Switzerland, Italy, Cyprus, Brunei, Holland, UK, Australia, Canada, Sweden, Israel na maayos din ang mga citizens nila na may buhay na disente.
Bakit hindi magawa ng mga Filipino leaders natin ang nagawa ng mga leaders ng ilang bansa - dahil mostly sa mga leaders natin ay wala silang pagmamahal sa mga Filipino - ang mahal lang nila ang kanilang sarili at ang pera.
Please facilitate our infrastructure facilities, our agriculture, our tourism, BPO, manufacturing (making our own products), reducing high cost of electricity, improving healthcare for the poor, giving employment to lower skilled individuals, strengthen our entreprenurs, etc.
We need Brother Eddie Villanueva to run the Senate.
Salamat sa Diyos.
HI GUYS IM MEL 27 YRS OLD HIGHSCHOOL GRAD,SHARING MY GOOD TOUGHTS IN THIS NEWS
OUR ECONOMY NOW ENJOYED WHAT WE ARE CALLED ANGEL FALLS!
Y?like ordinary water under nature stream,together with single leaf,it normally follows the flow, the central bank do the same!the money act like the boat,the water acts the surge flow of investment,if we cant control the money flows it will might be possible sinks, but if the boats cant control within the flow it easily get stuck and might be welcomed another problem,,,we Filipinos must take the ride steadily fast and in control mif we have money put in investment, know what are the competitive money back businessmen,,,,lasing kaya di makapag comment ng maayos..
We need Brother Eddie Villanueva in the Senate of the Philippines.
Glory to God in the Highest!