International Monetary Fund (IMF) staff completed their latest review of the Philippine economy Wednesday and pointed out that “potentially volatile” capital flows and low interest rates could present “risks” and “issues” involving asset prices and the foreign exchange rate.
In its statement released by the Bangko Sentral ng Pilipinas (BSP) via email, the IMF team said, “a surge in capital flows could extend asset price gains in the near term, but make asset prices and growth more volatile down the road.”
The IMF staff mission also said “potentially volatile capital flows are placing upward pressure on the exchange rate.”
“Low interest rates are fuelling prices of financial assets and pushing resources to nontradable sectors, especially in real estate,” the IMF mission added.
The BSP was credited for its efforts to avert the emergence of financial sector risks through the “broadening the definition of banks' real estate exposures and strengthening bank governance requirements” and the advanced adherence to global standards of capital requirements.
The IMF also reminded the Aquino administration of the urgency of “timely and transparent execution of PPP projects and relaxing foreign ownership limits would enhance growth prospects” considering the integration of the ASEAN and other parts of the global economy.
Adding two more years to the compulsory basic education of Filipinos and enhanced access to health care were also identified by the IMF staff mission as “important first steps” to improve the “job-readiness” of the labor force. — ELR, GMA News