BSP to revise BOP target in anticipation of slower dollar inflows

The Bangko Sentral ng Pilipinas (BSP) will revise its balance of payments (BOP) target for this year in anticipation of a slower dollar inflow for the period.

BSP Deputy Governor Amando M. Tetangco Jr. said yesterday that monetary officials were "reassessing" the BSP’s projections for dollar flows after the disappointing BOP showing last March.

"We will review our numbers," he said, hinting that the BSP might lower its original projection of a $100-million to $200-million BOP surplus for the whole of 2003.

The BOP account is a summary of the country’s trade and financial transactions with the rest of the world. Its current account component measures all trade in goods and services, while the capital and financial account shows the direction of the country’s "hot money" flows.

A large BOP surplus is a positive economic indicator pointing to net dollar inflows that usually accompany improved sentiment toward the local investment scene.

A BOP deficit, on the other hand, usually represents capital flight by both foreign and local investors due to perceived or actual disincentives in the local economy.

The BSP decided to revise the BOP target after the country lost $502 million in the first quarter due to a combination of capital flight, large imports of capital equipment and government debt repayments.

Data from the BSP showed that the March figure pulled down the whole first quarter balance of payment into a $502-million deficit despite the $141-million surplus in January and $55-million surplus in February.

According to Tetangco, however, the March deficit was "unusual" since it resulted from the war-related jitters that built up before the outbreak of the war between the US and Iraq.

Now that the war is over, Tetangco said the jitters have all but disappeared and could mean that dollar flows would eventually resume as financial markets stabilized.

"All players were on the defensive before the war," he said. "It may not be repeated." – Des Ferriols