The gross international reserves, which mirror the country’s external strength, climbed to a four-month high of $96 billion in December, supported by strong remittance inflows during the holiday season, data from the Bangko Sentral ng Pilipinas showed over the weekend.
It increased from $95.1 billion registered in November on the back of the BSP’s foreign exchange operations and higher value of gold holdings. It also surpassed the BSP projection of $93 billion for 2022.
“The month-on-month increase in the GIR level reflected mainly the Bangko Sentral ng Pilipinas’ net foreign exchange operations, the upward valuation adjustments in the value of BSP’s gold holdings due to the increase in the price of gold in the international market and net income from the BSP’s investments abroad,” the BSP said.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said the GIR could have also picked up further in December because of the seasonal increase in the country’s structural US dollar inflows, especially in view of increased holiday-related spending in December, such as OFW remittances, BPO revenues and record-high exports in recent months.
“For the coming months, the country’s GIR could still be supported by the continued growth in the country’s structural inflows from OFW remittances, BPO revenues, exports [though offset by imports], foreign tourism revenues as well as continued foreign investment inflows,” Ricafort said.
The reserves, however, declined by 11.8 percent or $12.8 billion from $108.8 billion in December 2021 because of the weaker peso against the US dollar in most part of the year.
Records showed that on an annual basis, the end-2021 GIR was the lowest since the $87.8 billion posted in 2019.
“The decline in the GIR somewhat correlated with the relatively weaker peso in earlier months of 2022,” Ricafort said in a report.
The peso depreciated by 9.3 percent against the greenback last year, pulled down by global uncertainties that impacted financial markets, including the aggressive moves by the US Federal Reserve in raising interest rates that boosted the dollar.
Data from the Bankers Association of the Philippines website showed the peso ended the year at 55.755, losing P4.756 compared to 50.999 on the last trading day of 2021. The peso declined to its lowest level of 59 a dollar four times in October 2022.
The BSP said the December GIR represented a more than adequate external liquidity buffer equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income.
It was also about 5.9 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.
The net international reserves, which refer to the difference between the BSP’s reserve assets and reserve liabilities that include short-term foreign debt and credit and loans from the International Monetary Fund, increased $900 million to $96.0 billion as of end-December 2022 from $95.1 billion in November.
The GIR reached a record high of $110.1 billion in December 2020.