RP posts $800-M BOP surplus

The country’s balance of payments yielded an $806-million surplus during the first two months of the year as the current account strengthened, bolstering the projections made by the Bangko Sentral ng Pilipinas (BSP) of a complete reversal in 2001 from the deficit position posted in 2000.

Data from the BSP show that net outflow was substantially lower during the period, effectively reversing the $1.087-billion deficit in the same period last year. Behind the reversal, according to the central bank, was the strong performance of the current account combined with lower net outflow in the capital and financial account.

The BOP account represents the country’s total transactions with the rest of the world, both in goods and services and in capital flows. A negative BOP position will translate to a drain on BSP’s dollar reserves, and a sustained deficit eventually leads to a weaker peso.

On the other hand, a surplus or even a lower BOP deficit will mean higher dollar reserves that will be critical in defending the local currency against attacks by currency speculators.

According to BSP Governor Rafael Buenaventura, the current account surplus was recorded at $1.802 billion, 39 percent higher than the surplus registered in January 2001.

Exports and imports continued to decline albeit at different paces with exports contracting slower than imports. Export of goods fell by 7.9 percent although the BSP speculated that the decline "appears to be bottoming out," with the year-on-year contraction slowing down to a single-digit level in January and February compared with the double-digit drops during the last nine months of 2001.

According to the BSP, the decline in electronics exports slowed down considerably although garments exports declined by 17.9 percent due largely to weak demand particularly in the US.

Imports likewise continued to slow down, dropping by 9.8 percent. This portends a potentially grimmer outlook in the coming months as industries continue to hold back on production and languish with excess capacity with no indications of imminent growth over the short-term.

Income accounts, on the other hand, yielded a surplus of $753 million, 49.7 percent higher than last year’s level due mainly to sustain remittances from overseas Filipino workers which accounted for 85 percent of gross income receipts.

The BSP said remittances from OFWs increased by 13.5 percent from $933 million last year to $1.059 billion, reflecting the increase in the number of Filipinos deployed abroad.

Buenaventura also reported that portfolio investments for the first two months of the year reversed to a net inflow of $787 million from a net outflow of $320 million in the same period last year.

Behind this, the governor said, was the increase in non-residents’ investments in debt securities particularly government-issued bonds, amounting to $1 billion. The proceeds of the bond issues were intended for budgetary support and international reserve management.

Investments in equities by non-residents dropped by $123 million during the same period last year to $88 million, but monthly investments indicated a resurgence in inflows.

Buenaventura said the BSP expects a $200 million surplus this year, a marked improvement from the most recent projections that placed the 2002 balance of payments at a $100-million deficit.

Originally, the BSP had calculated that the country would be incurring a huge BOP deficit of $1 billion as the economy skidded to a near-halt in the wake of the slump in electronics exports.

However, the central bank later upgraded its estimates and said the steady recovery of the global economy, specifically the US, would improve the country’s position enough to almost eliminate the BOP deficit.

Thus, Buenaventura said, the reversal projected for 2002 would result in a stronger peso, and this is expected to subsequently translate to more stable consumer prices and lower inflation.

The BSP chief said he expects the BOP to improve dramatically when the local economy recovers along with the anticipated recovery of its global trading partners, especially the US.

The turnaround of the US economy which lost steam after the Sept. 11 attacks, would directly benefit its trading partners like the Philippines which relies on the US market to absorb its exports.

At the same time, Buenaventura said the National Government had successfully front-loaded its expenditures in the first semester in order to stir growth. This is expected to help the overall BOP position.