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January-September 2002 BOP Yields $751 Million Surplus

12.19.2002

BSP Governor Rafael B. Buenaventura reported today that the country’s balance of payments (BOP) in the first nine months of 2002 yielded a $751 million surplus, a reversal of the $1,308 million deficit posted in the same period last year. Underpinning this positive development was the consistently strong performance of the current account.

Governor Buenaventura stated that the current account surplus nearly doubled to $3,929 million in January-September 2002 propelled largely by higher net inflows in the income account and the continued favorable performance of the trade-in-goods account.

Exports in the first nine months of the year reached $25,422 million, or 9.3 percent higher from the level a year ago. The sector’s performance was highlighted by successive months of double-digit growth after more than a year of weak performance. The implementation of the two-pronged strategy in the new export plan—industry clustering to enhance competitive advantage and an aggressive marketing program in both old and new markets—has helped bring export performance back to the growth path. Another contributory factor was the growth in the economies of the country’s trading partners.

Governor Buenaventura also noted the rising intra-Asian trade as non-Japan Asian economies like Hong Kong, Taiwan, Singapore, Malaysia, South Korea, China, and Thailand have overtaken the U.S. and Japan in terms of market share. Their combined market share of 35.4 percent of total exports for the first nine months of the year compared favorably with the 25.5 percent share of the U.S. and 14.9 percent of Japan.

Meanwhile, imports of goods for January-September 2002 climbed by 9.2 percent to reach $24,204 million, a turnaround from a 2.9 percent decline registered in the comparable period in 2001. The steady growth of imports could signal sustained economic expansion in the months ahead.

Imports of raw materials and intermediate goods—which accounted for more than 40 percent of total imports—expanded by 12.7 percent to $10,133 million. Imports of capital goods likewise rose to $9,946 million, owing to increased demand for telecommunication equipment―mainly inputs to electronics production―and office and EDP machines.

By contrast, imports of mineral fuels and lubricants fell by 10.9 percent to reach $2,393 million during the period in review. This development resulted from the decline in both volume of imports and the price of petroleum crude.

The trade-in-services account for the first three quarters of 2002 posted a lower net outflow of $857 million. The 40.9 percent narrowing of the deficit was traced to lower net payments for transportation services and for miscellaneous business, professional and technical services. Another contributing factor was increased net receipts from travel services owing to the higher rate of decline in travel payments relative to that of travel receipts. The lower travel payments reflected in part the weaker peso and the government’s program to promote domestic tourism among local residents.

The income account in January- September 2002 grew by 54.0 percent from the comparable year-ago level, to yield a surplus of $3.191 billion. The remittances of overseas Filipino workers (OFWs) expanded by 21.2 percent to $5.365 billion relative to the level posted in the same period a year ago. Contributing to this positive development was the 3.5 percent rise in the number of deployed new hires and rehires OFWs and the increased demand for professional, technical and service workers. The growth in OFW deployment was noted in Europe, Asia and the Americas.

There was a substantially higher net inflow in portfolio investments amounting to $692 million for the first nine months of 2002 compared to the net inflow of $208 million in the comparable period in 2001. The more than threefold expansion was due to increased 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 expanded slightly during the review period, with the bulk of the net inflows recorded in the early part of the year.

Similarly, non-residents’ investments in equity capital in the first three quarters of the year increased by more than twofold to $903 million. Equity funds were channeled to manufacturing companies, financial institutions, mining corporations, and transport and storage services. Major sources of direct investments were Japan, the U.S., Singapore, the U.K.. and the Netherlands.

The net outflow in the other investment account expanded by 12.6 percent to $5.109 billion during the review period. This developed following the 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 loan repayment and import payment.

As of end-September 2002, the GIR of the BSP reached $16.0 billion, 2.3 percent higher than the end-December level of $15.7 billion. At this level, reserves were adequate to cover 5.0 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.

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