The Philippines can ride out the current volatility of financial markets as the US Federal Reserve moves closer to normalization, the Department of Finance (DOF) said.

In its latest economic bulletin, the DOF said the Philippine stock market is strong, ranking fourth among 11 Asian bourses, and the country’s foreign reserves remain at very healthy levels.

“The country’s strong reserve position, its healthy banking system and profitable corporates should help the country avoid the deleterious effects of financial volatility from the Fed normalization,” DOF Undersecretary Gil Beltran said in a report to Finance Secretary Carlos Dominguez III.

“Economic reforms should continue to be implemented to boost growth and the country’s fundamentals should continue to be protected to sustain investor confidence,” Beltran said.

Beltran said the Philippine gauge soared 11.7 percent year-to-date, almost thrice the 4.4 percent average of 11 countries, behind Indonesia (19.12 percent), Thailand (16.57 percent) and India (12.09 percent).

The Philippine Stock Exchange index also performed better compared to China (-13.86 percent), Japan (-13.03 percent), Malaysia (-1.74 percent), Singapore (-0.89 percent), Vietnam (P4.28 percent), South Korea (4.92 percent), and Hong Kong (9.24 percent), Beltran said.

The Bangko Sentral ng Pilipinas (BSP)’s gross intentional reserves also remained strong, standing at P85.9 billion as of August this year, which can cover 10.5 months’ worth of imports of goods as well as payments of services and income.

“The BSP’s current reserve level also stands very comfortable than other Asian central banks,” said Beltran.

Indonesia’s buffer for the economy can only cover 3.9 months’ worth of import duties, Malaysia has 5.4 months, while Singapore got 6.3 months.

South Korea has 6.1 months buffer, Taiwan secured 1.5 months, while India has 6.9 months, and Vietnam with 2.3 months.

Beltran said “the country’s GIR is also better compared to the ASEAN-6 with 6.5 months buffer, and ASEAN-5’s 5.7 months worth import duties.

He said the BSP can take the peso depreciation as the opportunity to further boost its current reserve holdings, while sustaining the competitiveness of exports.

“As of September 22, the peso weakened to P47.85 against the US dollar from P47.15 at end-December last year owing to the normalization of interest rates in the US and the economic slowdown in China,” he said.

The peso has fallen 1.47 percent to date, trailing gains of 5.2 percent in Indonesia’s rupiah, 3.5 percent in Malaysia’s ringgit, 3.92 percent in the Thai baht, 4.78 percent in Singapore’s dollar, 6.11 percent in Korea’s won, and 0.85 percent in Vietnam’s dong.

Asian currencies, on average, rose 2.8 percent with five of 13 countries showing depreciation rates ranging from 0.1 percent for Hong Kong to 9.9 percent for China.

“The Philippine peso depreciated by only 1.5 percent year-to-date but showed the biggest depreciation month-to-date as the positive impact of the May election on the peso subsided,” Beltran said.

“The rest of Asia lost $205 billion to support their currencies; the Philippines gained $5.1 billion,” he added.###

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