Phl still a top draw for capital flows – BSP

MANILA, Philippines - The Philippines remains a favorable destination for foreign capital although global developments would still be the main reasons for any surges or declines in capital flows, the Bangko Sentral ng Pilipinas said, following its decision to hike key interest rates last month.

“Capital flows would still be dominated by global developments. That said, our underlying fundamental story is in tact, so we are assured of a solid base for capital inflows,” BSP Governor Amando M. Tetangco Jr. said yesterday.

“Any strong gyrations would still be dominated by external factors,” he said.

Net outflow of foreign portfolio investments reached $1.06 billion in the first seven months of the year, a reversal of the $2.39-billion net inflow recorded in the same period last year.

The outflow was attributed to bouts of volatility in global financial markets as investors speculate on the US Federal Reserve’s timing of increase in interest rates.

Foreign direct investments, meanwhile, amounted to a net inflow of $2.923 billion as of May, 34 percent higher than the $2.182 billion in the same period in 2013.

The central bank said the expansion reflected the country’s strong macroeconomic fundamentals, led by a lower-than-expected but still strong 5.7 percent growth in the first quarter and within-target inflation rate.

The BSP’s policy-making Monetary Board last month hiked its overnight borrowing and overnight lending rates by 25 basis points each to ensure inflation expectations will remain anchored.

The move also came ahead of an expected normalization in monetary policy in other advanced economies.