Forex reserves breach $100B as of Sept.

    Loans for production activities—which comprised 87.2 percent of banks’ aggregate loan portfolio, net of RRPs—expanded at a rate of 8.1 percent in November, higher than the reported growth in October at 7.5 percent.

    The country’s gross international reserves (GIR) level last month breached the $100-billion mark, reflecting inflows mainly from the central bank’s foreign exchange operations and government’s foreign currency deposits.

    Bangko Sentral ng PIlipinas data showed the GIR as of end-September climbed by $1.54 billion to $100.49 billion from the end-August 2020 level of $98.95 billion

    Benjamin Diokno, BSP Governor, said that this level is equivalent to 10 months’ worth of imports of goods and payments of services and primary income.

    It is also about 9.2 times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity.

    Diokno added the foreign currency inflows were partly offset by the “revaluation losses from the BSP’s gold holdings resulting from the decrease in the price of gold in the international market and foreign currency withdrawals made by the National Government to pay its foreign currency debt obligations.”

    Central banks use foreign currency reserves to keep a fixed rate value, maintain competitively priced exports, remain liquid in case of crisis, and provide confidence for investors.

    Reserves are also used to pay external debts, afford capital to fund sectors of the economy, and profit from diversified portfolios.

    Economists said the jump may be attributed to profits from investments overseas, and proceeds from overseas borrowings as record low interest rates due to the pandemic made borrowing more compelling.

    “The external sector outlook for 2021 reflects more favorable growth prospects as the global economy proceeds from an earlier restart of economic activity in the second half of 2020. Nonetheless, the balance of risks surrounding the outlook continues to lean toward the downside owing to possible resurgence in virus infections across countries as well as pandemic-induced structural changes in labor conditions and trade patterns,” Diokno said.

    Diokno on Wednesday announced higher revisions in the country’s balance of payments forecasts for this year and next.

    The BSP sees the overall BOP position to post a surplus of US$8.1 billion, or 2.2 percent of GDP, for this year. This is higher than the earlier projected $0.6 billion surplus for the year.

    This stems from the reversal in the projected current account balance from a deficit of $1.9 billion to a surplus of $6.0 billion due to the expected narrower trade-in-goods deficit.

    The end-2020 GIR level is expected to reach $100.0 billion, taking into account the increased foreign borrowings by the national government (NG) as well as the revaluation adjustments arising from the accounting treatment of the BSP’s gold holdings.

    The 2021 GIR level is seen to reach $102 billion in anticipation of continued NG foreign currency deposits as well as positive revaluation adjustments in gold holdings as gold prices could remain elevated in 2021 due to safe-haven investor demand.