Jun 262013

MANILA, Philippines – The temporary volatility in financial markets could last for months, but the Philippines will survive given its strong fundamentals, officials said on Wednesday.

“These are interesting times again,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco, Jr. said in a speech before financial officers in Makati City.

The central bank chief said the “furor” will soon “subside” once investors have a complete grasp on the United States Federal Reserve’s pronouncements that it may scale down stimulus measures this year.

“There is always volatility on the way to recovery. The way to recovery is not a clear path,” Tetangco said.

“What is important is that you focus on your goal and don’t be distracted because volatility is inevitable,” he added.

The scenario “will be there or a while, possibly for months,” said International Monetary Fund resident representative Shanaka Jayanath Peiris.

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Investors have been rattled by concerns that cheap money from the $85-billion monthly bond buying program of the US will end soon, prompting them to re-position their holdings back to world’s largest economy.

The Philippine Stock Exchange index, one of the world’s best performers last year, entered a bear territory last Tuesday, closing at 5,789.09 as it erased all its gains for the year.

A bear territory is marked by a 20-percent slump from the bourse’s last peak.

Meanwhile, the peso touched 44 level versus the dollar last Monday before it bounced back to close at 43.46 last Tuesday. It averaged at 43.389 versus the greenback at noon time Wednesday.

Despite the slump, the real economy remains “solid” with a healthy banking system and external payments position cushioning outflows, Tetangco said.

The BSP, he said, also sees inflation benign until 2015, and thus gives “no reason for us to deviate from our recent policy stance.”

“Monetary policy will continue be conducted in consideration of our inflation outlook… which in our current assessment is benign,” Tetangco said.

Inflation settled at 3 percent for the first five months of the year, falling at the low-end of the BSP’s 3- to 5-percent target range.

For May alone, consumer prices rose by 2.6 percent and for this month, Tetangco said there could be “no significant change.” 

The BSP June inflation forecast will be released this week.

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