'Hot money' outflow not destabilizing, says economic chief

A healthy payments position and a more domestic driven economy will cushion the impact of capital flight in terms of portfolio money amid speculations that the US will taper off its economic stimulus measure, the country's economic chief said Wednesday. 

 

"We don't expect that to have a destabilizing effect on the economy," said Socioeconomic Planning Secretary Arsenio Balisacan when asked for the effects of a possible easing of the US Federal Reserve's $85-billion bond buying program, dubbed quantitative easing or QE. 

 

"There's that uncertainty, but a big part of our growth is now domestic driven," he told reporters at the sidelines of the Global Development Network conference at the Asian Development Bank headquarters in Metro Manila.

 

Any portfolio outflow, Balisacan said, will not hurt the country's balance of payments or the record of transactions with the rest of the world, which posted a $1.809-billion surplus as of end-April. 

 

Speculations that the US Federal Reserve will scale back stimulus prompted investors to unload risky assets like peso denominated securities in favor of US instruments. 

 

Suffering from such reaction, the Philippine Stock Exchange index regressed to the low 6,000 levels in the past weeks and lost over 20 percent of its gains so far in the year. 

 

"It's a global scenario affecting stock markets and financial markets world wide. But the effect will be short-term," Balisacan noted. 

 

Central bank data showed foreign portfolio money—also known as “hot money” given the ease with which they enter and exit economies—registered a net outflow of $640.84 million in May, reversing April's $1.13 billion inflow. 

 

The US Federal Open Market Committee is meeting for two days this week on its policy stance. — VS, GMA News