The Philippines is resilient to global financial volatility because of a strong reserve position, the Finance department said Tuesday.
Finance Undersecretary and chief economist Gil Beltran said in an internal economic bulletin the country’s healthy banking system would also shield the local economy from shocks created by financial uncertainties.
“The country’s strong reserve position, its healthy banking system and profitable corporates should help the country avoid deleterious effects of financial volatility,” Beltran said.
Beltran made the comment after China’s stock and currency markets shook its Asian neighbors. China’s stock market dropped 6.9 percent in the first trading of 2016, while the rest of Asia tumbled with Japan slumping 3.1 percent.
The Philippine stock market dropped 1.7 percent against the average 2.6 percent decline in Asia. On the same day, the Chinese yuan depreciated by 0.6 percent against the US dollar.
Excluding the Japanese yen which appreciated and Vietnam which remained unchanged, all the other Asian currencies fell between 0.3 percent for Thailand to 1.3 percent for the South Korean won.
Earlier las week, China’s stocks lost 18 percent and its currency by 1.4 percent. Asian stocks have nosedived 8.2 percent while Asian currencies lost 0.5 percent, excluding Japan.
“The close linkages between Asian countries is evident in the high correlation between their financial market indexes,” Beltran said.
“Stock market indexes have a correlation averaging 0.91, with Thailand at the lowest rung at 0.65 to 0.97 for India, Singapore and Malaysia. The Philippines is at the lower half along with Thailand, Vietnam and Indonesia,” he said.
Finance said the Philippines performed remarkably well during the period of volatility, with its stock market dropping 7.2 percent compared with the Asian average of 8.2 percent.
The peso, however, dropped 1.9 percent against the US dollar, more than the average Asian decline of 0.5 percent.
The Bangko Sentral ng Pilipinas took the opportunity to depreciate the peso to further boost the international reserves to $82.7 billion, while sustaining the competitiveness of exports.
The rest of Asia lost U546 billion to support their currencies, while the Philippines gained $2.1 billion—one of the 6 Asian countries to achieve the feat.
“Disseminating positive economic information should eventually help soothe the frayed nerves of investors. When the dust of uncertainty settles down, investors will start to be rational and differentiate between countries,” Beltran said.
He also said that economic reforms should continue to boost growth and the country’s fundamentals kept to sustain investor confidence.
