The country’s balance of payments (BOP) for the first half of the year continued to be in surplus at $205 million. This developed as the current account posted a substantial surplus of $3,570 million mostly on account of the considerable improvement in the trade in goods balance.
Exports continued to perform strongly, growing by 12.0 percent during the first semester. The favorable export performance drew support from the strong demand for machinery and transport equipment, including computer peripherals, as well as garments and electronics. A buoyant global market, stimulated by the latest technological advances in e-commerce and wireless communications, is expected to induce further growth in exports, particularly of electronics. The prolonged, strong growth performance in the United States was behind the sustained high demand for electronics. In turn, Philippine exporters are expected to continue to capitalize on their comparative advantage in terms of manufacturing high valued-added products and supplying intermediate goods to the U.S. and other countries.
Meanwhile, the 4.1 percent expansion in imports of goods was attributed to higher purchases of capital goods resulting mainly from the increase in imports of telecommunication and electrical equipment and parts. The continued increase in capital goods imports is a favorable development, indicating that the economy is expanding its productive capacity to deepen the basis for durable growth prospects.
Also contributing to the growth in imports was the rise in imports of crude petroleum following the doubling in its average unit price to US$25.70 per barrel. Aggregate imports of raw materials and intermediate goods dropped by 8.1 percent due to lower importation of raw materials/accessories for the manufacture of electrical equipment. This developed as the ongoing restructuring in major export industries has resulted in the strengthening of backward linkages, thus increasing the local support industries’ contribution to overall production and conversely, reducing import dependence.
On the other hand, the capital and financial account yielded a deficit of $1,461 million during the period. Lower inflows of portfolio and other investments, including loans and trade credits, contributed largely to the deficit. There were net outflows coming from the other investments account following the higher net placements of residents’ investments abroad relative to net placements of non-residents’ investments in the Philippines. Meanwhile, the direct investment account yielded a surplus, although this was lower than the surplus registered a year ago.
These positive developments in the BOP resulted in higher gross international reserves amounting to $15.4 billion as of end-June 2000, equivalent to 4.6 months worth of import of goods, services, and income.
Relative to their respective program levels, the current account surplus of $3.6 billion was higher by $2.7 billion while the balance of the capital and financial account was lower by $3.0 billion. In terms of overall BOP, the first semester level of $205 million was lower by $172 million relative to the program of $377 million. The foreign reserves level, at $15.4 billion, was $700 million short of the year-end target of $16.1 billion but higher by $987 million relative to the first semester target of $14.4 billion.