HOME  ABOUT THE BANK  MONETARY POLICY  BANKING SUPERVISION  PAYMENTS & SETTLEMENTS  STATISTICS  FEEDBACK CORNER
   BSP NOTES & COINS  MONETARY OPERATIONS  LOANS-CREDIT & ASSET MGT  PUBLICATIONS & RESEARCH  REGULATIONS  PROCUREMENT

Feedback Corner

Publications and Research

Media Releases

BSP Adopts the BPM6 Compilation Framework; BOP Registers US$9.2 Billion Full-year Surplus in 2012

03.22.2013

The Bangko Sentral ng Pilipinas (BSP) has implemented the new framework in compiling and reporting the country’s Balance of Payments (BOP) statistics in accordance with Balance of Payments and International Investment Position Manual, 6th edition (BPM6).  This initiative is aligned with the international best practice of using the standards prescribed by the International Monetary Fund (IMF).  The shift from BPM5 to the BPM6 framework will entail various phases of implementation which are expected to be completed by 2014.  In the initial phase, the BOP data for 2011-2012 were converted to the BPM6 format and data coverage of some components was expanded to enhance the completeness of statistics.  A parallel presentation of BOP statistics for 2011-2012 under BPM5 and BPM6 formats are included in the BOP report to enable users to relate the transaction categories under the two frameworks. The succeeding phases of implementation will involve further changes in compilation methodologies and data sources as well as enhancements in data coverage which will likewise be reflected in historical BOP data starting with the 2005 series.

Highlights of the changes introduced in the BPM6 format are summarized as follows:

View Summary 

BOP Developments

The Philippines’ balance of payments (BOP) in Q4 2012 registered a surplus of US$3.4 billion, rising by more than sevenfold compared to the US$458 million surplus in the same period a year ago. This level represented 4.7 percent of the country’s Gross Domestic Product (GDP), in contrast with the less than one percent share to GDP in Q4 2011. The marked improvement in the country’s external payments position emanated mainly from the net borrowing of residents from the rest of the world in the financial account, a turnaround from the net lending recorded in the same quarter a year ago. This, coupled with the higher net receipts registered in the capital account more than compensated for the slightly lower current account surplus. The financial account performed robustly in the fourth quarter of 2012 due to higher investment inflows arising from the net incurrence of liabilities in the portfolio and other investment accounts as investor sentiment improved following signs of stabilizing global economic conditions. Meanwhile, the current account remained in surplus, supported largely by higher net receipts in the secondary income account (mainly workers’ remittances), and the reduced deficit in the trade-in-goods account given the stabilization of the economies of the country’s major trading partners. However, overall growth prospects remained fragile amid lingering financial worries across Europe and the sub-par growth in the U.S. While the pace of growth in emerging economies steadily continued, the potential spillovers of the euro area debt and banking crisis posed a significant downside risk to the global economic outlook.

Given the continued surplus in the BOP, the country’s gross international reserves (GIR) rose to US$83.8 billion as of end-December 2012, representing an accumulation of 11.3 percent (US$8.5 billion) from the GIR level of US$75.3 billion as of end-2011.  At this level, reserves could sufficiently cover one year’s worth of imports of goods and payments of services and income. It was also equivalent to 10.5 times the country’s short-term external debt based on original maturity and 6.6 times based on residual maturity. 

Fourth Quarter 2012 Developments

Current Account.  The current account surplus declined slightly to US$2.2 billion (equivalent to 3.1 percent of GDP) in the fourth quarter of 2012 compared to the level in the comparable period in 2011. The modest contraction was due to lower net receipts in the primary income and services accounts which more than offset the higher net receipts in the secondary income account and the lower deficit in the trade-in-goods account.        

The trade-in-goods account continued to improve in Q4 2012, registering a lower deficit of US$4.7 billion compared to the US$4.9 billion deficit recorded in the comparable quarter a year ago. This developed as the expansion in exports of goods (at 27.4 percent) exceeded that of imports of goods (at 16 percent). Amid encouraging signs that recovery is gaining traction in the country’s major trading partners (US and Japan), global merchandise trading activity continued to pick up pace. Exports of goods rose in Q4 2012, reaching US$11.0 billion compared to the previous year’s level of US$8.6 billion as external demand from major export markets in Asia (i.e., Japan, Hong Kong and Singapore), U.K., Switzerland, and Canada increased during the period. Imports of goods expanded by 16 percent to US$15.7 billion in Q4 2012 as increases were posted across all major commodity groups, except mineral fuels and lubricants. The improvement in imports of goods reflected the continued expansion in domestic economic activity and the rebound in merchandise exports.

Net services receipts amounted to US$1.4 billion in Q4 2012. This was lower however by 15.7 percent compared to the US$1.7 billion recorded in the same quarter in 2011. Relative to Q4 2011, higher net payments were registered in transport, travel, charges for the use of intellectual property, insurance and pension, financial, and government goods and services, while lower net receipts were recorded in telecommunications, computer, and information services. These developments more than offset the increase in net receipts registered in other business (by 2.8 percent), construction (by 171.4 percent), and personal, cultural, and recreational (by 40 percent) services. In particular, net receipts in technical, trade-related, and other business services, which comprised the bulk of business process outsourcing (BPO)-related transactions, expanded by 2.8 percent to reach US$2.6 billion during the quarter in review.
Net receipts in the primary income account of US$229 million in Q4 2012 were lower compared to the US$568 million net receipts recorded in the same quarter a year ago. The 59.7 percent contraction was due mainly to higher net payments in investment income even as earnings of resident overseas Filipinos (OF) workers increased by 7.3 percent to reach US$1.7 billion. Specifically, net dividends to foreign direct and portfolio investors increased by 82.8 percent and 60.8 percent, respectively, while investment income on reserve assets declined, notably interest income from holdings of foreign debt securities by the central bank (by 7.2 percent). These developments were offset by the lower net interest payments on portfolio investments (by 7.1 percent) and other investments (by 7.0 percent). In particular, net interest payments by private and public corporations on bonds issued abroad declined by 25.8 percent while those on foreign loans contracted by 27.5 percent due to lower global interest rates.

Net receipts in the secondary income account climbed by 8.0 percent to reach US$5.2 billion compared to the year-ago level of US$4.9 billion. The strong performance of the secondary income account was boosted by the 8.5 percent increment in personal transfers. The bulk of personal transfers were comprised of nonresident OF workers’ remittances amounting to US$5.0 billion, up by 8.9 percent from the year-ago level.

Capital Account.  The capital account registered US$48 million net receipts in the fourth quarter of 2012, higher by 60 percent than the level posted in the same quarter a year ago. This developed as capital transfers of the financial and non-financial corporations, households, and nonprofit institutions serving households (NPISH) reversed to net receipts during the period.

Financial Account.  The financial account registered a net borrowing by residents of US$2.5 billion in the fourth quarter of 2012, a turnaround from the US$4.3 billion net lending recorded in the same period in 2011. This developed as residents’ net incurrence of liabilities aggregating US$3.6 billion during the quarter exceeded their net acquisition of financial assets in the amount of US$1.1 billion. In particular, net incurrence of liabilities was recorded in portfolio and other investments, driven by investor confidence in the domestic economy on the back of the country’s strong macroeconomic fundamentals.

The direct investment account registered lower net borrowings by residents from the rest of the world amounting to US$92 million in Q4 2012.  This developed as the increase in net acquisition of financial assets offset the decline in net incurrence of liabilities.  In particular, net acquisition of financial assets increased to US$373 million from the US$125 million recorded in the same quarter last year driven largely by the significant increases in domestic corporations’ investments in equity capital (by almost eleven times) and debt instruments of foreign affiliates (by 21.3 percent) during the period. Meanwhile, net incurrence of liabilities by residents from the rest of the world declined slightly by  1.1 percent to US$465 million as equity capital infusion fell by 25.7 percent to settle at US$402 million during the quarter.

The portfolio investment account yielded net borrowings by residents from the rest of the world of US$1.9 billion in Q4 2012, a turnaround from the US$875 million net lending of residents to the rest of the world in the same quarter a year ago. In particular, residents’ net incurrence of liabilities reached US$1.9 billion in Q4 2012, a reversal of the US$918 million net repayment of liabilities in the comparable period last year. Meanwhile, residents’ net acquisition of financial assets yielded US$45 million, a turnaround from the US$43 million net disposal of financial assets in Q4 2011. Residents’ net borrowings from non-residents markedly increased as the economy continued to see strong investor appetite for emerging market assets amid indications of a stabilizing global economy.

The other investments account yielded net borrowings by residents from the rest of the world amounting to US$626 million in Q4 2012, a reversal of the US$3.9 billion net lending posted in the same quarter last year. Residents’ net acquisition of financial assets stood at US$694 million in Q4 2012, significantly lower than the US$3.3 billion net acquisition of financial assets registered in the same period last year. Meanwhile, the net incurrence of liabilities was recorded at US$1.3 billion, a turnaround from the            US$565 million net repayment of liabilities last year. 

The primary sources of incurrence of liabilities in other investments during the period included the following transactions: a) non-residents’ net placements of currency and deposits in domestic deposit-taking corporations (US$1 billion); and b) net availment of long-term foreign loans by domestic deposit-taking corporations (US$379 million) and the NG (US$309 million).

Financial derivatives registered a net loss of US$27 million in the last quarter of 2012, a turnaround from the US$88 million net gain in the comparable period in 2011 due to higher net payments by resident investors from cash settlements in financial derivatives during the period.

January-December 2012 Developments

The BOP position for the full year 2012 yielded a surplus of US$9.2 billion. However, this was    19 percent lower than the surplus of US$11.4 billion in the comparable period a year ago. The financial account recorded net borrowing of residents from the rest of the world as net incurrence of liabilities topped net acquisition of financial assets across component accounts. The current account surplus improved due mainly to the narrowing of the trade-in-goods deficit and increased net receipts of secondary income.

Current Account. The current account recorded a higher surplus of US$7.1 billion (2.8 percent of GDP) in 2012 compared to US$7.0 billion (3.1 percent of GDP) a year ago. The 2.2 percent improvement in the current account surplus was due to the narrowing of the deficit in the trade-in-goods account and higher net receipts in the secondary income account which more than compensated for the decline in net receipts in the services and primary income accounts.

As exports growth was faster than that of imports, the deficit in the trade-in-goods account declined by 10.4 percent in 2012. Exports of goods expanded by 20.9 percent, outpacing that of imports of goods at 11.3 percent. Total exports of goods in 2012 reached  US$46.3 billion while imports of goods aggregated US$61.5 billion. Contributing to exports growth were manufactured products (by 29.9 percent), fruits and vegetables (by 21.6 percent), and forest products (by 18 percent). Meanwhile, the growth drivers in imports of goods were raw materials & intermediate goods (by 4.9 percent), mineral fuels & lubricants (by 8.9 percent), capital goods (by 17.8 percent), and consumer goods  (by 10.1 percent).

The services account registered lower net receipts of US$3.9 billion in 2012, compared to US$5.3 billion in 2011. The 26.1 percent reduction in net receipts was due to increased net payments in transport (arising largely from increased outlays for freight, in line with the uptrend in imports of goods), travel, charges for the use of intellectual property, insurance and pension, financial, combined with lower net receipts from other business, telecommunications, computer, and information services. The net payments in these services components more than offset the higher net receipts registered in the remaining services sub-accounts, notably construction and personal, cultural, and recreational services as well as the decreased net payments in government goods and services.

The primary income account posted net payments of US$746 million in 2012, a reversal of the net receipts of US$280 million in the previous year. The turnaround was caused by higher net payments in investment income (by 30.7 percent) arising primarily from increased: a) net dividends to foreign direct investors on their equity and investment fund shares in resident enterprises (by 70.7 percent) and outlays for reinvested earnings related to direct investments (by 7.9 percent); b) net dividends to portfolio equity investors abroad (by 17.4 percent); c) net payments of interest on bonds issued by the National Government (NG) (by 8.7 percent) and by deposit-taking corporations  (by 27.7 percent); and d) lower interest income from holdings of foreign debt securities by the central bank (by 8.8 percent). These net payments negated the net receipts registered in earnings of resident OF workers which increased by 11.4 percent to US$6.4 billion.

Net receipts in the secondary income account rose by 4.3 percent, strengthened mainly by the 4.9 percent growth in remittances of non-resident OF workers, which reached    US$18.0 billion in 2012.
 Capital Account. The capital account registered US$136 million net receipts for 2012, higher by 4.6 percent than the level posted in 2011. This was due largely to increased capital transfers to the general government in the form of grants and donations during the year.

Financial Account. The financial account posted a net borrowing of residents from the rest of the world of US$6.1 billion in 2012, higher by 9.3 percent than the balance recorded in the same period in 2011. This indicated that the country remained a net recipient of funds from the rest of the world as residents’ net incurrence of liabilities registered US$10.3 billion during the year compared to their net acquisition of financial assets of US$4.1 billion in 2011. Net incurrence of liabilities was recorded in all component accounts, except financial derivatives, driven mainly by improved global investor sentiment on the back of signs of growth stabilization, particularly in the U.S. combined with the strength of the country’s macroeconomic fundamentals.

The direct investment account recorded lower net borrowings by residents from the rest of the world amounting to US$952 million in 2012 from US$1.3 billion in 2011. This transpired as the increase in residents’ net acquisition of financial assets was greater than the improvement in net incurrence of liabilities. Particularly, residents’ net acquisition of financial assets rose to US$1.8 billion, a more than threefold expansion from the  US$539 million registered in the previous year. Resident parent companies increased their investments in equity capital and debt instruments of affiliates abroad by 421.5 percent and 111.3 percent, respectively, to finance the growing operations of their businesses globally. Meanwhile, net incurrence of liabilities by residents from the rest of the world increased by 54 percent to US$2.8 billion on the back of the country’s strong economic growth, low inflation environment, favorable fiscal performance, and healthy external payments dynamics.

Net borrowings by residents from the rest of the world in portfolio investments yielded US$3.5 billion in 2012, lower than the US$4.4 billion net borrowings recorded last year. Net incurrence of liabilities to non-residents increased by 14.9 percent to  US$4.7 billion during the year, from US$4.1 billion registered in 2011. Meanwhile, residents’ net acquisition of financial assets abroad totaled US$1.2 billion, a turnaround of the US$277 million net disposal of financial assets posted a year ago.

Major sources of incurrence of liabilities in portfolio investments in 2012 included the following transactions: a) net placements by non‐residents in short-term peso‐denominated government securities issued by the NG (US$1.1 billion); b) non-residents’ net placements in equity securities issued by local  corporations (US$1.6 billion) and by deposit-taking corporations (US$126 million); and c) non-residents’ net placements in long-term debt securities issued by local corporations (US$513 million), domestic deposit-taking corporations (US$886 million), and the NG (US$883 million).

The other investments account yielded net borrowings by residents from the rest of the world amounting to US$1.6 billion in 2012, a reversal of the US$1.1 billion net lending posted in the previous year. Residents’ net acquisition of financial assets stood at   US$1.4 billion in 2012, lower than the year-ago level of US$1.7 billion. Meanwhile, net incurrence of liabilities was recorded at US$3 billion, a significant increase from the previous year’s level of US$653 million.

The primary sources of incurrence of liabilities in other investments during the period included: a) non-residents’ net placements of currency and deposits in domestic deposit-taking corporations (US$2.9 billion); b) net availment of long-term foreign loans by domestic deposit-taking corporations (US$378 million); c) net availment of trade credit and advances extended by non-residents to domestic corporations (US$380 billion); and   d) other accounts payable to non-residents incurred by deposit-taking corporations  (US$180 million).

View Table

Read Full Report (PDF)


RSS Subscribe for updates

Archives