Reserves hit $85.7B at end-Oct.

GROSS INTERNATIONAL reserves (GIR) — which shield the country from liquidity shocks — strengthened further at end-October, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

The central bank’s preliminary data showed that GIR totalled $85.702 billion as of October, inching up by 0.14% from end-September’s $85.581 billion level and surpassing last year’s $74.71 billion by 14.71%.

The BSP’s gold reserves, which form part of the country’s foreign exchange buffer, was steady at $8.016 billion for the fourth consecutive month since July but grew bigger by 2.07% from the $7.853 billion level seen in October 2018.

Meanwhile, gains from the central bank’s investments abroad — which accounted for bulk of the reserves — picked up to $73.586 billion last month from end-September’s $72.97 billion but still bigger than the $59.851 billion recorded in the same period last year.

Foreign currency deposits decreased to $2.372 billion at end-October from the $2.869 billion seen in the previous month and also down from the $5.434 billion logged in October 2018.

Meanwhile, the BSP’s reserve position in the International Monetary Fund (IMF) rose to $564.3 million last month from end-September’s $561.3 million and the year-ago level of $481.4 million.

Special drawing rights (SDR) — or the amount which the Philippines can tap from the IMF’s reserve currency basket — was steady $1.164 billion, but was thinner than the $1.182 billion seen in the same period a year ago.

Net international reserves, which refer to the difference between the BSP’s GIR and total short-term liabilities, rose by $120 million to $85.69 billion as of end-October from end-September’s $85.57 billion.

“The end-October 2019 level of the GIR provides an ample external liquidity buffer that is equivalent to 7.5 months’ worth of imports of goods and services and payment of primary income,” the BSP said in a statement.

“It is also equivalent to 5.5 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity,” it added.

Security Bank Corp. Chief Economist Robert Dan J. Roces said the import cover and short-term debt external cover levels are still well above the internationally-accepted thresholds of three months for the import cover and one for short-term debt cover.

“The foreign reserves’ relatively flat growth month-on-month suggests the country’s balance of payments (BoP) for the last two months may have dropped to more modest surplus positions. We maintain that the diminished BoP surplus would do little to the cumulative BoP surplus position and we still think that this would not exert strong depreciation pressures to the Philippine peso,” Mr. Roces said in an email, noting that he expects GIR to hit $85.5 billion at end-2019.

Meanwhile, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said the current GIR level will boost the peso.

“This higher GIR bodes well for the stability of the exchange rate. This also suggests a better standing for the Philippine economy in terms of trade,” Mr. Asuncion said.

“A higher GIR almost always is good and consequently for the level of the exchange rate. If the exchange rate is stable, it helps the attractiveness of the Philippines as an investment destination. A stable exchange rate encourages more investment and trade inflows,” he added.

The BSP expects the country’s reserves to stand at $83 billion by yearend. — Luz Wendy T. Noble