Coming off a difficult and challenging year, the Philippines performed admirably in 2010. The worst of the financial crisis had passed and economic activity had resumed. Gross Domestic Product (GDP) posted a 7.3% growth, the highest achieved in 34 years, led by the industry and services sectors. The Balance of Payment surplus for 2010 reached a record $14.4 Billion due to the strong recovery of the export sector as well as heavy remittances from Filipinos overseas. Average annual inflation rate stood at 3.8%, which was lower than the government’s projection of 3.5 to 5.5%, although higher than 2009’s level of 3.2%.

The Philippines was one of only two countries in the region, the other being Indonesia, that did not increase interest rates since the end of the global financial crisis. The BSP kept its policy rates unchanged during the whole year, at 4% for the overnight borrowing and 6% for the overnight lending --- rates which had been maintained since July, 2009. Average bank lending rate declined to 7.22% as of the end of 2010 from 8.19% in 2009. On the other hand, interest on Treasury Bills drastically dropped during the year. The 91-day TBills, which serves as benchmark for banks’ short-term loans, fell from 3.887% at the start of the year to an all-time-low of 0.7% at the end of 2010 as investors opted to place their funds in short-term papers in anticipation of an eventual interest hike in 2011.

The Philippine stock market had another incredible year in 2010, reaching new record highs as investors became increasingly confident that the local and global economy as well, were on their way to recovery. Strong economic indicators, low interest rates and the influx of foreign funds also contributed to the continued confidence in the stock market. The PSE index was one of the best performing in the world, surging 37.6% in 2010.