051107: Net hot money inflow hits $1.089B in Jan-Apr

By Des Ferriols
The Philippine Star 05/11/2007

Net hot money inflow amounted to $1.089 billion in the first four months of the year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Preliminary data ending April 28 indicate that total inflow amounted to $4.417 billion during the four-month period but outflow amounted to $3.327 billion, leaving only $1.089 billion in net inflow.

Despite the huge outflow, however, the total net inflow in the first four months of the year was 84.26 percent higher than last year’s $591 million as investors capitalized on the country’s positive economic prospects.

Last year, the total inflow was also significantly lower over the year ago level, amounting to only $1.96 billion while total outflows amounted to $1.369 billion.

Market analysts said investor confidence was boosted by the significant improvements in the country’s fiscal position and the subsequent improvement in the ratio of government’s total outstanding debt to gross domestic product (GDP).

They are also expecting stronger inflows following reports that Standard & Poors could upgrade its outlook ratings on the country’s actual credit rating after the election on Monday.

Despite the unexpected revenue shortfall in the first quarter of the year, investors appeared convinced that the Arroyo administration would still meet its fiscal targets by the end of 2007.

Following an international no-deal roadshow, investment banks said they felt optimistic that the fiscal program would stay on track, mainly because economic planners have previously demonstrated their commitment to meeting their targets.

Citigroup senior economist and public sector group head Vaughn Montes told reporters earlier that the credibility of the economic team was supporting this optimism despite the revenue shortfalls in the first quarter.

Investors are giving credence to the proposals laid out by the authorities on how they intend to realize the revenue targets this year," Montes said. "Aside from the one-off gains from the sale of assets, they are also expecting improvements in collection efficiency."

The Arroyo administration overshot its deficit target for the first quarter of the year, generating a budget gap of P52 billion in January to March as revenues fell dramatically short of expectations in the three-month period.

While brushing off speculations that the fiscal program was going off-kilter yet again, finance officials admitted they are considering ways to beef up revenues, mainly by going after one-time gains from the sale of assets and collection of its long-standing receivables.

 

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