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PIA Press Release

Peso seen to remain strong for 2007

By Renee F. De Guzman

San Fernando City, La Union (8 October) -- The country's sound macro-economic fundamentals, particularly the resilient economic growth and benign inflation, the high dollar inflows from Filipino Overseas Filipino Workers coupled by the portfolio and foreign direct investments and export receipts will sustain peso for the rest of 2007, according to Bangko Sentral ng Pilipinas.

The peso is expected to maintain its strength despite the risks posed by volatile oil prices, the unwinding of global imbalances and volatility in the financial markets.

The strong peso hurts exporters and the Philippine based families here of the OFWs and even the tourism sector and domestic producers of import substitutes. It however dampens inflationary pressures. It redowns to lower interest costs, enables the BSP to build up its international reserves, and allows pre-payment of foreign debts.

Earlier, the BSP acted on the exporters' problems with a strong peso by establishing the peso rediscounting facility, an electric rediscounting facility and also contributed P50 million to an export promotion fund.

Monetary authorities expect inflation to settle between 2.1% and 2.8% this month and targets to end the year at 4%-5%.

Meanwhile, the balance of payments (BOP) in the second quarter of 2007 reversed to a surplus of $1.8 billion from a deficit of $81 million last year, bringing the first-semester BOP to a surplus of $3.2billion, up by a whopping 56.8 percent as against the $2billion a year ago.

The first-half figure brought the gross international reserves (GIR) to $26.4billion as of end -June 2007, which is equivalent to 4.8 months of imports of goods and payment of services and income.

BSP attributes the surplus in BOP position mainly to increased remittances of OFWs, exports and tourism dollar revenues coming into the economy.

According to BSP Deputy Governor Guinigundo Diwa, the strong performance in the BOP in the second quarter was spurred by the continued strength in the current account and the rebound in the capital and financial account. (PIA La Union) [top]

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