Currency vulnerabilities shifting; peso seen at risk
Credit to Author: ANNA LEAH E. GONZALES| Date: Wed, 17 Apr 2019 16:20:04 +0000
Currency upheavals similar to those that hit emerging economies last year are unlikely but risks are on the rise for some EMs such as the Philippines, a London-based research consultancy said.
“This time last year we warned in our Risk Monitor about currency vulnerabilities in Turkey and Argentina. The risks of similar currency crises occurring now is low,” Capital Economics said in a report released late on Tuesday.
”No major EM has a current account deficit on the same scale as Turkey and Argentina did a year ago. And following falls last year, emerging market currencies lookmore fairly valued,” it added.
Capital Economics, however, noted that risks were building in a few countries.
“Current account deficits in Ukraine, Colombia, the Philippines and Romania have widened sharply and are now among the largest in the emerging world,” it pointed out, adding that currencies in these economies “look modestly overvalued based on their real effective exchange rate.”
The Philippine and Colombian peso, Ukrainian hyrvnia and the Romanian leu are expected to depreciate as a result, especially since foreign exchange reserves are low, “limiting central banks’ ammunition during times of stress”.
“All told, we have penciled in falls of around 10 percent against the dollar for these currencies,” Capital Economics said.
The Philippines’ current account deficit widened to an all-time high of $7.9 billion last year, equivalent to about 2 percent of gross national income and 2.4 percent of gross domestic product, as the imports significantly outpaced exports.
The trade-in-goods deficit rose 21.9 percent to $49 billion last year, reflecting a 9.4-percent expansion in imports and a 0.3-percent decline in exports.
The post Currency vulnerabilities shifting; peso seen at risk appeared first on The Manila Times Online.