Dollar surplus near three-year record

Manila Times
June 17, 2005

Dollar surplus near three-year record

By Maricel E. Burgonio, Reporter 

THE Philippines as of end-May earned more dollars than it gave up, and enjoyed its biggest net dollar inflows in nearly three years, based on data released by the Bangko Sentral ng Pilipinas.

BSP data show that the country in the first five months of the year posted its highest balance of payments surplus since June 2002.

The balance of payments sums up a country’s economic transactions with the rest of the world, and includes net proceeds from external trade, investments and other income transfers. It shows whether a country enjoys a dollar surplus or suffers from a deficit, in which case the government would have to dip into its dollar reserves to make up for the difference.

As of end-May, the Philippines’ external payments position registered a surplus of $1.638 billion, a big jump from the $477 million posted in the same five-month period last year.

The last time the country’s payments position reached a similar level was in end-June 2002, during which the Philippines enjoyed a surplus of $1.741 billion.

For May this year alone, the country’s payments position registered a surplus of $751 million, or higher than a year ago’s $141 million.

Amando M. Tetangco Jr., incoming BSP governor, said the surplus was due to the national government’s foreign borrowings, higher overseas Filipino worker (OFW) remittances and stronger foreign portfolio investments.

“It’s clearly a positive development,” he said.

In May the national government borrowed $750 million through the sale of global bonds as part of its $4-billion foreign borrowing program this year.

OFW remittances, meanwhile, continued to post double-digit growth, with the BSP’s latest report for April showing Filipinos abroad sending home $3.1-billion, or a hefty 17.2-percent growth year on year.

Lastly, portfolio investments, also called “hot money” because of their tendency to flood a market on buying opportunities and leave at the slightest sign of bad news, reached $98 million in May, thus raising net inflows to $1.818 billion in the first five months of the year.

Earlier, the BSP reported that the country’s dollar reserves as of end-May reached their highest level since April 2002.

The Philippines’ dollar cache went up 3.7 percent to $17.337 billion from $16.745 billion the year before.

Monetary authorities expect the country’s external payments position to end the year with a surplus of $852 million, an improvement from an earlier forecast of just $464 million.

They said the higher surplus position this year will ensue largely from a 10.5-percent rise in OFW remittances to $9.4 billion, $3 billion in foreign portfolio inflows and $1.2 billion in foreign direct investments.