The country’s gross international reserves (GIR) reached a record $109.79 billion at the end of 2020 on inflows from the central bank’s operations and state borrowings.
Preliminary Bangko Sentral ng Pilipinas (BSP) data showed on Friday that the amount was a 4.75-percent and 24.99-percent increase from figures a month and a year earlier, respectively.
It also breached the previous all-time high of $104.81 billion last November, and the BSP’s adjusted official $105-billion estimate for the year.
In a statement, the Bangko Sentral said the month-on-month expansion reflected inflows mainly from the its foreign-exchange (forex) operations, the national government’s (NG) deposits of proceeds from its issuance of global bonds with the central bank, and revaluation gains from its gold holdings due to the increase in gold prices in the international market.
“These inflows were partly offset, however, by the NG’s payments of its foreign-currency debt obligations,” it added.
The latest GIR level offers an adequate external liquidity buffer that can help cushion the local economy against external shocks.
It is also enough to cover 11.7 months worth of imports, larger than November’s 11.1 months and December 2019’s 7.6 percent; 9.6 times the country’s short-term external debt based on original maturity; and 5.5 times based on residual maturity.
Net international reserves, which refer to the difference between GIR and total short-term liabilities, also grew to $109.8 billion at end-December from $104.8 billion a month earlier.
The BSP estimates these reserves to expand to $106 billion this year, equivalent to 10.9 months of import cover, with the support coming from current and financial account inflows.
On financial account inflows, foreign direct investments are forecast to rebound with inflows of $7.5 billion and foreign portfolio investments to reach $3.5 billion in 2021 “in line with the consensus view of a recovery in investment sentiment given better global and domestic economic prospects next year.”
In a comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the GIR could still post new record highs as the economy reopens and recovers further because of the rollout of coronavirus vaccines.
The “GIR could also post new record highs in view of more proceeds of foreign borrowings and other fundraising activities by the government, especially for various Covid-19 programs, including for Covid-19 vaccine purchases, and by the private sector that entail foreign buyers/investors in the coming months amid near record-low interest rates…” he added.
Ricafort also said the continued growth in the country’s business process outsourcing sector amid the need for greater outsourcing worldwide could also help bolster reserves.