The BSP reported today that the country’s balance of payments (BOP) for the full year 2002 yielded a surplus of $660 million, a reversal from the $192 million deficit posted last year. Underpinning this positive development was the sustained surplus in the current account.
The current account surplus in 2002 more than tripled to yield a surplus of $4,197 million from US$1,323 million in 2001. This positive development was attributed to the combined effects of higher net inflows in the income account, the surplus in the trade-in-goods balance and the lower net outflows in services. The higher net inflows from current transfers also helped strengthen the current account’s performance for the year.
Exports of goods in 2002 grew by 10.1 percent to reach $34,383 million. The sector’s performance was highlighted by successive months of double-digit growth after more than a year of sluggish performance. The recovery in exports was supported by increasing intra-regional trade in Asia, absorbing the slack in demand from traditional markets such as the U.S. and Japan. Exports have successfully penetrated other Asian markets such as Hong Kong, Taiwan, Singapore, Malaysia, South Korea, China, and Thailand. The combined market share of these Asian economies at 36.2 percent was close to the combined share of the U.S. (24.7 percent) and Japan (15.0 percent).
Meanwhile, imports of goods for 2002 climbed by 6.2 percent to reach $33,975 million, a turnaround from the 4.5 percent contraction in 2001. Imports of goods recovered following 10 consecutive months of year-on-year growth since February 2002. Higher demand for electronic inputs by export-oriented industries accounted for the rise in imports.
Meanwhile, the trade-in-services account posted a net outflow of $1,264 million, down by 38.3 percent from the level in 2001 on account of the lower net payments for transportation services, construction services and for miscellaneous business, professional and technical services. Higher net receipts from travel and communication services also contributed to the reduction of the trade-in-services account deficit. The net receipts from travel services rose by 75.9 percent to $869 million following the 29.1 percent contraction in travel-related expenditures coupled with the modest increase in travel receipts. The lower travel expenditures reflected in part the weaker peso and the government’s aggressive tourism promotion program.
The net inflows of income account for 2002 grew by 24.0 percent to $4,550 million, a turnaround from a 17.3 percent decline in 2001. The higher surplus was due to the continued remittances from overseas Filipino workers (OFWs), which expanded by 18.9 percent to $7,171 million relative to level in 2001. Contributing to this favorable development was the 2.6 percent rise in the number of deployed OFWs particularly medical workers, teachers, entertainers, caregivers, clerks and other service workers. A large portion of these OFWs was deployed in the Middle East, Asia and Europe. Meanwhile, the bulk of OFW remittances, which comprised about 90 percent of gross income receipts, came from the U.S., Saudi Arabia, Japan, Hong Kong, U.K. and Singapore.
The portfolio investments account during the year yielded a net inflow of $1,912 million compared to last year’s net inflow of $1,050 million due mainly to the substantially higher non-residents’ investments in resident issued foreign-denominated debt securities, particularly government-issued medium-term bonds. Meanwhile, net inflows of non-residents’ investments in equity securities rose slightly by 7.0 percent to $410 million during the review period.
Similarly, non-residents’ investments in equity capital increased by 50.5 percent to $945 million in 2002, the bulk of which were channeled to manufacturing companies, financial institutions, mining corporations, and construction companies. The major sources of direct investments were the U.S., Singapore, the U.K. and the Netherlands.
The net outflow in other investments widened by 54.1 percent to $5.023 billion in 2002. This developed mainly on account of withdrawals by non-residents of their maturing foreign currency deposits from their FCDU accounts in local banks as well as increased net deposits abroad by resident non-banks—majority of which were corporations involved in build-operate-transfer schemes—to fund their future obligations, such as debt servicing and import payments.
As of end-December 2002, the GIR of the BSP reached $16.2 billion, 3.3 percent higher than the end-December 2001 level of $15.7 billion. At this level, reserves were adequate to cover 4.7 months’ worth of imports of goods and payment of services and income. Using other reserve coverage measures, the level of reserves was 2.9 times the amount of the country’s short-term external debt based on original maturity or, alternatively, 1.4 times the amount of short-term external debt based on residual maturity.