Although the normalization of the currently ultra-accommodative monetary policy in advanced economies could lead to a rebalancing of global capital flows and depreciation of emerging markets’ currencies vis-à-vis the dollar, the Philippines is in a favorable position to navigate tightening global financial conditions given the manageable inflation environment and sufficient external buffers.
The current level of gross international reserves – at USD108.45 billion – is more than sufficient to withstand adverse external shocks. At the same time, structural flows from remittances, IT-BPM revenues, and foreign direct investments are expected to further bolster the country’s external payments position.