BSP Governor Rafael Buenaventura announced today that the balance of payments for the first semester yielded a deficit of $616 million. Nonetheless, the Governor noted that the external position has considerably improved with the current account position posting a surplus of $587 million in June. The BOP deficit in the second quarter narrowed to $114 million from $502 million deficit in the first quarter when tension in the Middle East escalated.
Governor Buenaventura reported that the current account for the first semester ended with an $868 million surplus. This level, however, was lower by 58.3 percent than the comparative level last year. The strong income account, largely on account of OFW remittances, made up for the reversal of the trade-in-goods into deficit and the increased net outflow in the services account.
OFW remittances in the first six months of the year rose by 8.0 percent to $3,880 million from the level in the same period last year. This was attributed to the increasing share of higher-paid professionals among the deployed workers that more than offset the effect of the decline in total deployment caused by SARS, the temporary suspension of deployment in Hong Kong due to the wage issue and the first quarter geopolitical conflict. Engineers, caregivers, performing artists, clerks and sales workers made up a sizable number of the high-skilled workers.
Meanwhile, the trade-in-goods balance in the first semester reversed to a deficit of $1,309 million from a surplus of $116 million in the same period last year following the frontloading of imported raw materials and crude oil as part of the Iraq war contingency measures. Imports of goods grew by 10.9 percent to reach $17,949 million while exports inched up by 2.1 percent to $16,640 million.
The trade-in-services account for the first semester recorded a net outflow of $827 million, 56.3 percent higher compared to the level in the same period in 2002. Net inflows from travel dropped by 37.2 percent to $322 million as the SARS outbreak in some Asian countries and security concerns dampened international tourism. Tourist arrivals in the Philippines began its downturn in March 2003 after a strong turnaround in 2002 when the government initiated an aggressive promotion to revive the tourism industry. The drop was noted in the number of tourists coming from the U.S., Japan, Korea, Hong Kong, Taiwan, Singapore and Australia.
Meanwhile, the capital and financial account reversed to a net outflow of $2,439 million from a net inflow of $1,682 million posted in the same period in 2002 as investors remained in the sidelines pending signs of a definitive global economic upturn.
Direct investment account yielded a $10 million net inflow. The first semester infusion of equity capital into local industries was eroded slightly by the net outflow of other capital representing repayment of intracompany loans.
Likewise, the portfolio investment account managed a $258 million surplus, albeit lower than the $1,451 million surplus in the comparable period a year ago. The 14.1 percent net increase in investment by non-residents in debt securities was offset by the decline in investment in equity securities, which in turn was due to weak corporate performance. Higher resident investments in foreign securities also contributed to the weaker performance of the portfolio investment account.
Meanwhile, the other investment account posted a substantially larger net outflow of $2,696 million compared with the $609 million net outflow registered in the first semester of last year due in turn to net repayment of maturing loans.
The BSP’s gross international reserves (GIR) reached $15.9 billion as of end-June 2003. While this level was lower than the end-December level of $16.2 billion, it was adequate to cover 4.4 months’ worth of imports of goods and payment of services and income. The level of reserves was also 2.5 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.