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Philippine’s Central Banker Isn't Worried About Possibilities Of Its Currency Getting Even Weaker

Philippine’s Central Banker Isn't Worried About Possibilities Of Its Currency Getting Even Weaker
The Philippines’ good tidings were being heralded by the tumbling of the peso to a fresh 11-year low.
He wasn't worried about either the deficit or the currency's drop — or even his expectation that the peso may fall further, said Nestor Espenilla, governor of the country's central bank, Bangko Sentral ng Pilipinas, or BSP.
With the U.S. dollar rising around 3.7 percent against the peso, the Philippine currency has been the worst performing in Asia this year. The peso's peers have generally gained against the greenback in contrast.
At 10:27 a.m. HK/SIN on Tuesday, the dollar was fetching 51.159 pesos. The value of a country's total imports exceeds its total exports when there is weakness in the country's current account deficit and analysts have blamed the weakness of the peso on this.
The difference between the two figures often must be financed by debt.
"The Philippines is an emerging market that's growing quite fast. It's natural for such a market to have a current account deficit," Espenilla said during a television interview on Tuesday. "What's important is the quality of that deficit. If you look underneath the numbers, it's actually capital goods imports that are behind it. And this is going to improve productive capacity of the economy further."
There is not going to be a rise of to more than 1 percent of gross domestic product in the current account deficit, he added.
"Today, the Philippines has good market access, low external debt, and therefore, this current account deficit is something the economy can readily finance," Espenilla said on the sidelines of a Philippine economic briefing in Singapore.
Citing official forecasts that inflation would remain just above its 3 percent target ahead, the central banker also said he wasn't overly concerned that the peso's fall might stoke price increases in the country.
"Since we have shown credibility in our inflation targeting, the pass-through effects on inflation of exchange rate depreciation have become very markedly low," he said.
However, somewhat more concerned about the currency were the analysts. 
Funds flowing into the country's growing outsourcing industry and remittances in the fourth quarter from overseas Philippine workers ceased to offset the Philippines' trade deficit, economists at bank ANZ noted in a note on Monday.
According to data from the central bank, from the year-earlier period to, remittances have risen this year, up 4.5 percent between January and May to $11.35 billion. Particularly for capital goods to be used in the construction industry, imports have surged, ANZ noted.
ANZ said it was concerned about expanding credit to the real estate sector, citing "spectacular" property price rises, while the country's efforts to build its lagging infrastructure were likely a beneficiary of those imports.
But for the BSP appeared to be intervening in the market, with international reserves declining, the peso would have been pushed down even further with a mix of the current account deficit, credit growth, low inflation and a central bank that isn't changing interest rates, ANZ said.
he expected economic growth would come in around 7 percent for 2017, which would be the midpoint of the official 6.5 to 7.5 percent official range, said Benjamin Diokno, the Philippines' secretary of budget and management.
He also talked up the positives of the peso's fall.
"Luckily, a depreciation favors our overseas Filipino workers and their families, maybe about half of the population benefit from a weak peso. And our exports also will benefit," Diokno said. .

Christopher J. Mitchell

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