The Bank of the Philippine Islands (BPI) said the Philippines is well-positioned to weather potential risks should the US Federal Reserve (the Fed) decide on an interest-rate hike in December or January next year as expected.
BPI President and Chief Executive Officer Cezar Consing does not view the impending US rate hike as a danger, as the $285 billion Southeast Asian economy owns a strong external sector position and the central bank, the Bangko Sentral ng Pilipinas (BSP), has acquired greater flexibility.
The US Fed has delayed a closely watched interest-rate hike and analysts expect the Fed to announce it either in December or January.
Asked if he sees the banking industry raising its own interest rates next year, Consing replied: “It really depends on what our own central bank does. Our central bank has much more flexibility than a lot of other central banks in the world. They can pick their spots,” he said.
“As a matter of fact, our economic managers have much more flexibility to pick and choose their spots. A combination of very low leverage ratios for the government as a whole; the fact that we’ve got cash flow from remittances, we’ve got cash flow from business-process outsourcing and we have very low inflation. So we have so much more flexibility relative to a lot of other countries,” the executive told financial reporters.
As to where the Philippines is in the economic cycle, he believes the economy is well-positioned to weather a downturn.
“I wouldn’t view it as a danger. You get to a point that you have to increase rates and if you don’t increase rates in the West, there’s a tendency for asset bubbles [to form]. I think there’s enough resilience in our economy to [weather] higher rates. I really do,” he said.
Data from the BSP showed that remittances for the month of July were up slightly, posting $2.08 billion, or 0.5 percent, higher than the $2.07 billion recorded the prior year.
The remittances help feed domestic demand that has allowed the Philippines to sustain the momentum for growth this year no matter the global uncertainties generated by the slowdown in China and the still tentative output potential in the US.
The country’s slow growth was attributed in part to the slump in remittances from the Americas, which were down 8.5 percent to $894.31 million.
On a year-to-date basis, remittances grew by 4.8 percent to $14.16 billion.