The country’s balance of payments position registered a surplus of US$574 million in Q4 2014. This was 54.5 percent lower than the US$1.3 billion surplus recorded in Q4 2013 despite the gains in the current account, which were almost negated by the substantial net outflows in the financial account or net lending by residents to the rest of the world, consisting of residents’ acquisition of financial assets abroad and repayment of external liabilities. The large outflows in the financial account were due largely to the notable growth in net placements of residents in other investments and direct investments abroad. As global growth prospects remain solid, particularly in the US, China and India, residents have explored investment opportunities abroad. Meanwhile, the narrowing of the trade-in-goods deficit contributed mainly to the higher current account surplus.
The BOP position for full-year 2014 recorded a deficit of US$2.9 billion, a reversal of the US$5.1 billion surplus recorded in 2013. The deficit resulted from the marked increase in net outflows in the financial account despite the continued improvement in the current account surplus. The net outflows in the financial account stemmed from the increased net outflows in other investments and the reversal of portfolio and direct investments from net inflows to net outflows. The current account continued to perform favorably on the back of the lower trade-in-goods deficit and higher net receipts in the primary and secondary income accounts.
As a result, The country’s gross international reserves (GIR) reached US$79.5 billion as of end-December 2014, a decline of 4.4 percent (or US$3.6 billion) compared to the end-December 2013 GIR level of US$83.2 billion. At this level, reserves could sufficiently cover 10.4 months’ worth of imports of goods and payments of services and income. It was also equivalent to 4.9 times the country’s short-term external debt based on original maturity and 4 times based on residual maturity.1
Fourth Quarter 2014 Developments
Current Account. The current account yielded a surplus of US$4.7 billion (equivalent to 5.9 percent of GDP) in Q4 2014, 43.1 percent higher compared to US$3.3 billion (4.4 percent of GDP) recorded in same quarter a year ago. The expansion in the current account surplus was attributed to the narrowing of the trade-in-goods deficit combined with the increases recorded in net receipts from the primary and secondary income accounts.
The trade-in-goods deficit narrowed to US$3.7 billion in Q4 2014 from US$4.8 billion in Q4 2013. This was largely on account of the 6.2 percent decline in goods imports, which was primarily due to the drop in petroleum crude imports brought about by the fall in the international price of crude oil.
The trade-in-services balance recorded lower net receipts of US$1.6 billion in Q4 2014, compared to the US$1.8 billion net receipts in Q4 2013. The 7.3 percent decline resulted largely from increased net payments for travel services (US$1.3 billion) and transport services (US$476 million). Increased net payments were also recorded in insurance and pension, charges for the use of intellectual property, and government goods and services.
The primary income account posted net receipts of US$516 million in Q4 2014, an increase of 70.5 percent from the US$303 million net receipts in the comparable period last year. Growth was driven by the decline in net payments of investment income (by 10.7 percent) on account of lower dividends paid to foreign direct investors, and the sustained increase in compensation inflows from resident overseas Filipino (OF) workers which amounted to US$1.9 billion.
Net receipts in the secondary income account reached US$6.3 billion in Q4 2014 compared to US$6.1 billion in Q4 2013. The 3.2 percent expansion was accounted for mainly by the 5.4 percent increase in personal transfers totaling US$5.8 billion. The bulk of these personal transfers came from non-resident OF workers' remittances (about 98 percent) which increased by 5.6 percent to US$5.7 billion.
Capital Account. Net receipts in the capital account dropped to US$28 million in Q4 2014 from US$32 million in Q4 2013. This developed mainly on account of lower net receipts of other capital transfers to the general government.
Financial Account. The financial account continued to register net outflows (or net lending by residents to the rest of the world) of US$4.5 billion in Q4 2014, more than twice the US$2 billion net outflows in the comparable quarter a year ago. This was due mainly to the substantial increase in net outflows in other investments which reached US$2.3 billion. Portfolio and direct investments also registered net outflows amounting to US$1.2 billion and US$977 million, respectively, during the quarter.
The direct investments account yielded higher net outflows of US$977 million in Q4 2014, more than double the net outflows of US$471 million in Q4 2013. Residents’ net acquisition of financial assets of US$2.4 billion exceeded their net incurrence of liabilities (foreign direct investments in the Philippines or FDI) of US$1.4 billion. This developed as equity capital placement abroad by resident non-banks surged to US$1.7 billion from US$226 million. Meanwhile, non-residents’ net equity capital investments in Q4 2014 rose to US$896 million from US$21 million.
The portfolio investments account posted net outflows of US$1.2 billion in Q4 2014, 7.5 percent higher than the net outflows in Q4 2013. This development was reflective of the prevailing volatility in financial markets amid lingering uncertainty over the global growth prospects. Residents’ net acquisition of financial assets amounted to US$930 million, a reversal of the US$81 net disposal of financial assets in Q4 last year on account of net placements by domestic deposit-taking corporations (US$777 million) and the central bank (US$171 million) in debt securities issued by non-residents.
The other investment account recorded net outflows amounting to US$2.3 billion in Q4 2014, more than five times the US$426 million registered in the comparable quarter last year. Net outflows stemmed mainly from higher net acquisition of financial assets which reached US$4 billion from US$1.2 billion in Q4 2013, due largely to higher residents’ deposit placements (US$2.7 billion) and net lending (US$1.4 billion) abroad.
January-December 2014 Developments
Current Account. The current account yielded a higher surplus of US$12.6 billion in 2014 from US$11.4 billion in 2013. This was mainly due to the narrowing of the trade-in-goods deficit and to gains in the primary and secondary income accounts.
The trade-in-goods deficit narrowed by 10.3 percent to US$15.9 billion from US$17.7 billion as the expansion in goods exports of 7.3 percent exceeded the 2.3 percent growth in goods imports. Exports of goods totaled US$47.8 billion as all major commodity groups posted increases except petroleum and sugar products. Growth in total exports was boosted largely by higher shipments of manufactured products, which rose by 6.7 percent to reach US$38.3 billion. Goods imports amounted to US$63.6 billion, attributed to increments in purchases of consumer goods (14.4 percent) and raw materials and intermediate goods (by 3.9 percent).
Net receipts in trade-in-services dropped by 30.5 percent to US$4.9 billion in 2014 from US$7 billion in 2013. The decline resulted largely from increased net payments for travel and transport services by 63.9 percent and 8 percent, respectively, combined with decreased net receipts from technical, trade-related and other business services (by 2.1 percent).
Net receipts in the primary income account reached US$1.1 billion in 2014, higher by 11.9 percent than the US$957 million last year. This was attributable to the 7.4 percent expansion in receipts from compensation of resident OF workers to US$7.4 billion.
Net receipts in the secondary income account went up by 7 percent to US$22.6 billion, buoyed by non-resident workers' remittances which aggregated US$20.4 billion in 2014.
Capital Account. The capital account recorded net receipts of US$101 million in 2014, 24.1 percent lower than the US$134 million posted in the previous year, due to the decline in other capital transfers to the NG.
Financial Account. The financial account registered net outflows amounting to US$10.1 billion in 2014, more than fourfold the USS$2.2 billion net outflows registered a year ago. This was on account of the substantial increase in the net outflows in other investments and the reversal to net outflows in portfolio and direct investments.
The direct investment account reversed to net outflows of US$789 million from net inflows of US$90 million a year ago. This developed on account of the 91.7 percent rise in residents’ net acquisition of financial assets to US$7 billion from US$3.6 billion due to resident corporations’ net placements in both equity capital (US$2.9 billion) and debt instruments (US$4 billion) abroad.
Portfolio investment account recorded net outflows of US$2.5 billion during the period, a reversal of last year’s net inflows of US$1 billion. This was due to residents’ net acquisition of financial assets of US$2.5 billion, from a net disposal of assets amounting to US$638 million combined with non-residents’ net withdrawal of investments amounting to US$3 million, a reversal from the net placements of US$363 million in 2013.
The net outflows in the other investment account doubled to US$6.9 billion from US$3.4 billion in 2013 on account of increased net placements in currency and deposits abroad by resident banks and non-bank corporations, amounting to US$2.7 billion and US$1.4 billion, respectively), and to higher resident banks’ net lending of US$2.7 billion. Meanwhile, residents’ net repayment of liabilities amounting to US$66 million was attributed to non-residents’ net withdrawal of deposit placements in resident banks (US$334 million) and residents’ net repayment of trade credits and advances (US$302 million).
Revised 2013 BOP data
Revised 2013 BOP data with accompanying technical notes will be released in the BSP website. The revisions mainly reflected data updates from various data sources and post audit adjustments.
1 Outstanding short-term debt were revised to reflect the new reporting framework in line with international standards under the latest External Debt Statistics Guide and International Monetary Fund’s Balance of Payments and International Investment Position Manual, 6th Edition.
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