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BOP Yields a Smaller Deficit of $17 Million in April

07.24.2003

BSP Governor Rafael B. Buenaventura announced today that the BOP position yielded a smaller deficit of only $17 million in April 2003, as tension in the Middle East receded following the quick end of the war in Iraq. The April BOP position was a substantial improvement compared to the $557 million deficit posted last month. This brought the cumulative BOP position for the first four months of 2003 to a deficit of $519 million. The continued surplus in the current account moderated the net outflow in the capital and financial account.

The current account remained in surplus at $342 million at the back of the strong income account driven mainly by sustained OFW remittances, which offset the net outflows in the trade-in-goods and services accounts.

Remittances from OFWs increased by 8.7 percent to $2,538 million from the level in the same period last year, attributed to the increase in the number of deployed higher-paid professionals such as nurses, engineers, performing artists, clerks and salesmen. Moreover, the increase in remittances developed even as the number of workers deployed abroad declined by almost 1 percent due to the combined effects of SARS-related travel risks, the temporary suspension of deployment in Hong Kong because of the minimum wage cut issue and the tension in the Middle East in the first quarter.

Meanwhile, the trade-in-goods balance reversed to a deficit of $1,021 million from a surplus of $133 million in the same period last year. This developed on account of the substantial rise in imports in the first quarter following the frontloading of raw materials and oil products as part of the Iraq war contingency measures. Imports of goods grew by 14.5 percent to reach $11,962 million exceeding the 3.4 percent growth of exports at $10,941 million.

The trade-in-services account for January-April 2003 posted a net outflow of $560 million, 60.9 percent higher compared to the year-ago level. The deterioration was due mainly to the combined effects of the decline in travel receipts and the rise in freight payments. Net inflows from travel dropped significantly to $208 million amid travel advisory issued by the World Health Organization on SARS-affected countries, including the Philippines. Tourist arrival registered the steepest decline at 24.4 percent in April—the height of SARS concern—consequently bringing down travel receipts by 31.8 percent for the month. The total number of tourist arrivals for the first four months declined by 4.4 percent. Contraction was largely evident in arrivals from Hong Kong, Taiwan and the U.S.

Meanwhile, the capital and financial account reversed to a net outflow of $612 million from a net inflow of $1,734 million posted in the same period in 2002 due to the uncertain global economic outlook.

The reversal was evident in direct investment account which registered a net outflow of $39 million during the first four months of 2003, a turnaround from last year’s surplus of $843 million.

However, the cautious investors’ sentiment was relatively less pronounced in the portfolio investment account as it managed to end the four-month review period with a $638 million surplus, albeit lower than the $1,919 million surplus in the comparable period a year ago.

The other investment account posted a larger net outflow of $1,203 million compared with the $1,023 million net outflow registered in the first four months of last year. Largely accounting for the increase in net outflow was the net repayment of loans and withdrawal by non-residents of their foreign currency deposits with local banks.

The BSP’s gross international reserves (GIR) reached $16.21 billion as of end-April 2003. This level was slightly higher than the end-December level of $16.18 billion. The BSP’s GIR was adequate to cover 4.5 months’ worth of imports of goods and payment of services and income. The level of reserves was also 2.4 times the amount of the country’s short-term external debt based on original maturity or, 1.3 times the amount of short-term external debt based on residual maturity.

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