Banco de Oro Universal Bank provides a - Asianbanks.net

8B A N C O D E O R OR e v i e w o f 2 0 0 5 O p e r a t i o n sDespite the political and economic uncertainties in the local and global markets, thePhilippines registered a respectable performance in 2005, proof of the economy’s resilienceand sustainability. Gross Domestic Product expanded by 5.1%, much higher than what mosteconomists and analysts had expected. The fiscal deficit, targeted to reach P180 billionor 3.4% of GDP, amounted to only P146.5 billion or just 2.7%. The Balance of Paymentsturned in a huge surplus of $2.4 billion, much higher than the optimistic estimates ofgovernment and a huge reversal of the $280 million deficit in 2004. Gross InternationalReserves hit a record high of $18.5 billion, boosted by the record-breaking $10.7 billionin OFW remittances. The negative factors were the slowdown in agriculture, as the ElNino hit the country last summer, and the weak performance of exports, particularly ofelectronics components.Foreign Exchange RateThe peso broke below the P53.00 level as early as the first quarter of 2005, but thepolitical crisis and the delay in the passage of the EVAT dragged down the peso back tothe P56.00 level by the third quarter. However, the peso stillmanaged to recover strongly in the last two months, closingthe year at P53.090. Robust inflows of OFW remittances andnet foreign investments, coupled with the overall mending ofconfidence in the economy’s prospects, provided additionalstrength. These inflows also contributed to the hefty surplusin the country’s balance of payments. All in all, thesedevelopments resulted in the peso being the best performingcurrency in the region last year.Interest RatesDomestic interest rates followed a steep downward trend in2005, attributable to high system liquidity and the BSP’s prudent but still relativelyloose monetary policy. The banking system was awash with money on the backof the double-digit expansion rate in domestic liquidity (M3) as of the thirdquarter and continued weak private sector demand for credit. Moreover, banks bidaggressively for the limited supply of government debt papers after the scheduledauctions in December were cancelled due to the improved fiscal position. Likewise,