BoP surplus hits 3-year high of $1.63b

Manila Standard Today

June 17, 2006

 

BoP surplus hits 3-year high of $1.63b

By Eileen A. Mencias

Heavy hot money and remittance flows coupled with the national government’s $750 million bond issue pushed the country’s balance of payments position to a surplus of $1.638 billion in May, the highest since June 2002, the Bangko Sentral ng Pilipinas reported yesterday.

 “This is clearly a positive development,” BSP Deputy Gov. Amando Tetangco Jr. said. “The surplus is due to the capital and current account inflows, the national government’s borrowings, portfolio investments and OFW (overseas Filipino workers) remittances.”

The BoP refers to the country’s transactions with other nations such as debt servicing, imports, exports, loans and remittances. A surplus means the economy generated more dollars than it spent to pay transactions with the rest of the world.

The BoP surplus in May alone hit $751 million.

The national government issued $750 million worth of global bonds in May that boosted the BoP. Foreign borrowings pad the BoP because they are immediately reflected as inflow to the economy. Debt servicing on foreign borrowings, meanwhile, is treated as outflow when government pays them.

The BSP has forecast a BoP surplus of $852 million this year because of huge remittance from Filipinos working abroad and the heavy hot money flows.

The BSP originally estimated a surplus of $464 million in the BoP this year. Remittances and the foreign portfolio investments more than made up for slower export growth. The BSP, which had expected exports to grow 10 percent this year, lowered the target to 8 percent.

Remittances, however, are expected to amount to $9.1 billion this year from an original estimate of $8.6 billion.

Remittances in the first four months of the year reached $3.07 billion, up 17 percent from $2.62 billion year-on-year. The higher remittance growth was attributed to the increase in the number of Filipinos finding jobs abroad as well as higher use of banking channels in sending money home.

Foreign portfolio investments in the first five months of the year yielded a net inflow of $1.818 billion, 1,700 percent higher over the $99.2 million reported in the same period last year.