Peso, inflation seen improving in H2

Monetary officials are confident that foreign exchange and inflation would perform as expected in the second half of the year despite the fluctuations in the first half. The Bangko Sentral ng Pilipinas (BSP) is set to review its macroeconomic targets and projections in preparation for consultations with the International Monetary Fund (IMF) but monetary officials are confident that there would be no major changes. BSP governor Amando Tetangco said the peso began improving and inflation was slowing down after a slight surge recorded in April. Tetangco said the BSP was also seeing investment inflows going back into the bond and equities market after the widespread fears of another hike in US interest rates that siphoned funds out of emerging markets. “Market forces are predictable in the sense that after experiencing shocks, they eventually level off," Tetangco said. “Right now, people are saying it is time to buy and investors are looking for good buys especially in the emerging markets." According to Tetangco, markets were regaining their footing but even this was to be expected since the country’s macroeconomic fundamentals have remained stable. “In fact, we are seeing improvements," Tetangco said. “The fiscal position of the national government is even better now." The Department of Finance (DOF) reported that the national government had managed to generate another surplus in May, giving about P26 bln below its target deficit for the January to May period. “That’s also part of the reason why external liquidity is coming in and why our reserves still look good," Tetangco said. Tetangco said inflation was also decelerating, capped by the easing of price increases in May. “We'll review our targets and projections, as we always do in the middle of the year," Tetangco said. “We’ll be sitting down around end of June in preparation for the IMF consultation." In its spring report, the IMF indicated that it was more optimistic of the country’s economic growth prospects this year until 2007 but cautioned that government should reduce public debt. The IMF said economic recovery is being supported by surging worker remittances but priorities should focus on containing inflation and reducing public debt. In its World Economic Outlook, the IMF projected the country’s gross domestic product to grow by 5 percent this year and 5.6 percent in 2007. Inflation, on the other hand, was projected to surge to an average of 7.4 percent this year before dropping to 4.7 percent in 2007. The IMF said in the Philippines, economic recovery was being supported by dollar remittances from overseas Filipino workers (OFWs) which was expected to continue growing at double-digit rates this year. The IMF said that the Philippines as well as other countries high public debt like India, Indonesia and Pakistan, could taken advantage of favorable fiscal outlook. According to the IMF, the current account surplus in emerging Asia also showed “surprising resilience" to the sharp hike in oil prices.-GMANews.TV