RP to end year with small BOP surplus
Des Ferriols
Philippine Star
Despite the steady decline in the country’s balance of payments (BOP), the Bangko Sentral ng Pilipinas (BSP) said yesterday that the year would still end with a small surplus, with remittances from overseas Filipino workers (OFWs) offsetting the massive withdrawal of portfolio investments from the local equities market.
BSP Governor Amando M. Tetangco Jr. said that he is confident that the BOP would stay at surplus level this year.
“The balance of payments (BOP) for this year will be lower than the $2-billion forecast but still a surplus,” Tetangco told reporters yesterday. “We’re firming it up. We’re looking at breakdown.”
Tetangco, however, admitted that the decline in the BOP was to be expected but said he is fairly confident that the surplus would hold.
Based on the latest BSP figures, the BOP registered a $482-million deficit in September, dragging the country’s overall surplus position below the $2-billion level for the first time since 2004.
The September deficit was significantly larger than last year’s $85-million deficit and at that time, the country’s nine-month surplus was recorded at $6.691 billion.
The surge in the BOP deficit was due to a decline in the country’s gross international reserves (GIR) which dropped to $36.69 billion because of foreign debt payments and dollar withdrawals.
The decline in the BOP position would be even larger in October, as the BSP reported the net outflow of portfolio investments soaring to $911.68 million in the first 10 months of the year.
The BSP said that there was a $390-million net outflow of registered foreign portfolio investments from the market in October alone, the highest monthly net outflow so far this year.
Portfolio investments are foreign funds invested in stocks, government securities and the money market. Often referred to as hot money, these funds are most vulnerable to shifts in expectations and perceptions than direct investments.
The BSP reported that the heavy monthly outflow in October blew the nine-month outflow ever closer to the $1-billion mark. Last year, the BSP reported a net inflow of $3.675 billion.
With exports slowing down along with smaller inflow of foreign direct investments, the BOP is expected to suffer more hits before the year is over.
The BOP is the sum of the country’s transactions with the rest of the world and the bigger the surplus, the bigger the comfort level of monetary officials who have to watch and manage the volatility in the foreign exchange rate.
The country’s balance of payments surplus is expected to reach only $2 billion this year, about $500 million lower than the original $2.5-billion level projected for 2008.
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