The entry of foreign banks into the country will likely be beneficial to the country’s external position, as it is seen to improve the inflow of investments, the Bangko Sentral ng Pilipinas (BSP) said.
Central bank Deputy Governor for the Monetary Stability Sector Diwa Guinigundo said the flow of foreign direct investments (FDI) toward the country—particularly in the financial services industry—is set to rise with the entry of foreign players in the banking system.
“So far, we have received applications from three foreign banks. We expect FDI to continue to improve as the presence of foreign banks will help facilitate the inflow of various investments from their home countries, including in manufacturing industry,” Guinigundo said.
The three banks include Japan’s Sumitomo Mitsui Banking Corp., South Korea’s Shinhan Bank and Taiwan’s Cathay United Bank. The three banks’ application to operate in the Philippines follow the recent legislation which further liberalized the banking sector.
“Furthermore, the foreign banks could help boost financing opportunities to fund more productive activities in the local economy,” he added. These developments, according to Guinigundo, will help support the financial account of the country’s Balance of Payments (BOP).
In 2014 the country’s BOP position plunged into a multibillion-dollar deficit amid the record-high surplus seen in the country’s current-account component due to the heavy capital outflows seen in country’s financial account in the BOP.
Guinigundo said the expected rise in FDI due to the entry of foreign banks in the country will complement the surplus in the current account—which is also seen to rise from the steady inflows from overseas Filipino workers’ remittances, as well as from tourism and business- process outsourcing receipts.
“All of these point to a robust external position for the country over the medium term,” Guinigundo said.
The country’s BOP position as of end-February this year is at $1.21 billion, reversing the $4.135-billion deficit seen in the same two month period last year. it also exceeds the government’s target of $1 billion in surplus for the year.
The BSP will be releasing the first quarter BOP figures today.