Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno assured foreign investors that the foreign exchange environment will continue to be stable and he sees no threats to the Philippine peso, making the country an attractive investment location still.
“The peso is sound and there’s no threat because of the rising interest rate (and inflation) in the US,” Diokno told Singapore-based investors during the 2nd Philippines-Singapore Business and Investment Summit held online on Friday. The peso has been on a stable footing around the P48:$1 for some time.
The BSP has a flexible and market-based exchange rate. “(And) as a result we have right now a hefty gross international reserves, that’s a big buffer,” said Diokno. The GIR currently stands at $110 billion, the highest on record.
Diokno assured investors that the peso will have the GIR as cushion against speculative attacks and it could continue to be one of the strongest currency in the world, same as in 2020.
“I don’t think there’s any threat on the Philippine peso at this time and we continue to have steady supply of foreign exchange coming from foreign direct investments (FDI). As you know during the pandemic, FDI in the Philippines fell by 24 percent but globally, it fell by about 42 percent. So we continue to get FDI (and) steady income from our overseas Filipino workers (OFWs),” said Diokno. The BSP is projecting a rebound in remittances to four percent growth this year.
Diokno also told investors that the banking system remained strong and sitting on a well-funded financial sector. He said the government had long ago opened the banking industry to foreign investors as well. “We have started the digital banking in the Philippines and also Islamic banking (so) Philippines is a very attractive place. Despite the crisis, our banks are strongly capitalized,” he added. Banks’ assets also continued to grow.
In his presentation during the summit, Diokno said the impact of the COVID-19 pandemic on the economy is temporary and transitory. He cited the sound macroeconomic fundamentals and a reform momentum that will ensure the economy will return to pre-pandemic levels as soon as possible or by mid-2022.
“The Philippines is a smart investment destination,” he said. And, as far as the BSP is concerned, he said they continue to implement measures to enhance the country’s competitiveness as an investment destination. These measures include: financial digitalization; the BSP’s pursuit of its legislative agenda to make the Philippines a better investment location; and monetary and financial sector reforms.
“The reform momentum will help fuel the Philippines’ recovery, address structural issues, and continue to enhance the Philippines’ competitiveness as a leading investment destination. You are welcome to do business with us and be part of our exciting post-COVID narrative,” he told investors.
Diokno said the BSP’s efforts on financial digitalization and its push for vital legislative measures are all aimed at improving the country’s competitiveness as an investment site.
The BSP has been pushing for various proposed laws such as: the lifting of secrecy of bank deposit; to allow banks to expand credit activities that comply with the mandated lending for agriculture development; to create a credit risk database for micro, small, and medium enterprises (MSMEs); to improve the protection of financial consumers; and to strengthen the capacity of government financial institutions to assist MSMEs and other strategically important enterprises, among others.
The BSP also supports other laws to boost FDI, such as amendments to Foreign Investment Act, which seeks to allow “practice of more professions” by foreigners in the Philippines and to reduce the mandatory number of local hires by foreign investors; amendments to Public Service Act, which seeks to lift limits on foreign equity in certain sectors currently considered “public utility”; and amendments to the retail trade liberalization Law, which seeks to lower the required minimum paid-up capital for foreign retail investors.