BSP cites population’s part in helping EMs’ close gap with developed economies PDF Print E-mail
Thursday, 28 October 2010 15:30

The Bangko Sentral ng Pilipinas (BSP) said population growth along with the continued economic expansion in emerging markets (EMs) is helping these economies close the gap with major markets.

BSP Governor Amando Tetangco Jr. told reporters that this is among the indicators he stressed in his presentation during the recent Annual Meeting of the International Monetary Fund-World Bank (IMF-WB) in the US.

He explained that “the higher the population, the higher the population demand.”

A recent study by the Asian Development Bank (ADB) shows that middle class, which has a daily income of US$ 2-25, in emerging markets have grown from less than 60 percent to over 50 percent of the population.

From around 565 million people in 1990, the ADB study said middle class previously accounts for about 21 percent of total population but as of 2008 middle class is about 56 percent of the 1.9 billion people in Developing Asia.

Data from the National Statistics Office (NSO) show that as of Aug. 1, 2007, the country’s population has nearly reached 88.6 million. There is no data, however, on the number of middle class.

“The amount of spent (by middle class) has also increased substantially,” Tetangco said.

However, he pointed out that population growth “is an advantage, if the purchasing power of the population can be improved.”

“(Improvement in purchasing power) is an indicator of potential demand. For investors, that is a positive factor,” he said.

Thus, he highlighted the need for “policy prescription in some macro economic and financial sector policies” as well as “external sector policies that ensure stability, growth in the middle to long -term.”

Tetangco also said regional cooperation plays a major role in this bid.

He said member-countries of the ASEAN+3 “have been able to intensify regional monetary cooperation.”

“Compared to other regions, I think ASEAN+3 have the most visible, concrete form of monetary cooperation in the Chiang Mai Initiative Multilateralization,” he added.

ASEAN+3 groups member-countries of the Association of Southeast Asian Nation that include Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam as well as China, Japan and Korea.

The Chiang Mai Initiative Multilateralization (CMIM) Agreement supercedes bilateral swap arrangements (BSAs) among ASEAN+3 member countries that include three BSAs of the Philippines with China, Japan and Korea.

Contribution of the Philippines to this Agreement amounts to US$ 4.552 billion, similar to the commitments of Indonesia, Malaysia, Singapore and Thailand while total CMIM fund amounts to US$ 120 billion.

Under the CMIM agreement, the Philippines can avail of up to 2.5 times its contribution or up to US$ 11.38 billion through currency swaps once it experience balance of payments (BOP) problems.

EMs have been attracting more investments in the recent years even after the recent global economic downturn due to the uncertainties in the recovery path of major economies.

Thus, EMs have been experiencing strong capital inflows, which has resulted to among others the appreciation of its local currencies.

The peso, for one, is now trading at 53-level against the US dollar after being at the 46-level at the start of the year.

Some sectors like the exporters are against the strengthening of the local unit since this makes the price of the country’s products expensive to their foreign partners.

The BSP leaves it to market players to determine the exchange rate but joins only to address volatilities as part of its mandate of maintaining price stability.