BSP Governor Rafael B. Buenaventura reported today that the country’s balance of payments (BOP) for the first eight months of 2002 yielded a surplus of $903 million, a reversal of the $1,133 million deficit posted in the same period last year. The strong performance of the current account was behind the marked improvement in the overall BOP.
Governor Buenaventura stated that the current account surplus nearly doubled to $3,532 million in January-August 2002, as it was propelled by the higher net inflow in the income account, the significantly lower net outflow in the services account, and the continued favorable performance of the trade-in-goods account.
In the goods account, exports continued to perform well in August, bringing the year-to-date performance to $22,319 million or 8.3 percent higher than the level a year ago. This was the fifth month in a row that exports recorded a year-on-year double-digit growth after 14 consecutive months of decline. The implementation of a two-pronged strategy—industry clustering to enhance competitive advantages and an aggressive marketing program in both traditional and new markets—appeared to have reaped positive results in export performance.
Governor Buenaventura said that, although the U.S. and Japan continued to be important export markets—accounting for 25 percent and 15 percent, respectively, of the total exports of goods during the review period—their market shares contracted from last year’s 28 percent and 17 percent, respectively. By contrast, the share of exports going to Asian countries, namely China, Hong Kong, Taiwan, Singapore, Malaysia, South Korea, and Thailand rose to 35 percent from 31 percent last year.
Meanwhile, imports of goods climbed for the seventh month in a row since February, bringing the cumulative level of imports to $21,293 million, or an expansion of 7.8 percent. This was a reversal of the 1.2 percent decline registered in the comparable period in 2001.
Imports of raw materials and intermediate goods—which accounted for more than two-fifths of total imports—expanded by 12.1 percent to $8,974 million on account of higher importation of materials/accessories for the manufacture of electrical equipment. Similarly, capital goods imports expanded by 11.4 percent to $8,735 million following increased importation of telecommunication equipment and office and EDP machines.
By contrast, imports of mineral fuels and lubricants posted a decline of 11.9 percent to $2,101 million because of the contraction in the volume of imports and the drop in the average price of petroleum crude. The price of petroleum crude for the first eight months of 2002 declined to an average of $23.29 per barrel from $24.68 per barrel last year. Meanwhile, the fall in the volume of oil imports was attributed mainly to the temporary slowdown in operations of some refinery units of oil companies because of, among others, check-up and maintenance operations.
The trade-in-services account in January-August 2002 yielded a lower net outflow of $721 million. The 43.4 percent decline of the deficit was due to lower net payments for transportation services and higher net receipts from travel services, which rose by 71.1 percent to $669 million. The latter was mainly due to the decline in travel payments following the weaker peso and the government’s promotion of domestic tourism among local residents.
Strong remittances from overseas Filipino workers (OFWs) contributed to the increase in the net inflow in the income account to $2.906 billion, or 54.5 percent higher from the level during the same period a year ago. Remittances of OFWs grew 22.6 percent to $4.832 billion reflecting, in part, the 3.9 percent rise in the number of newly hired and rehired OFWs during the review period. The increase in OFW deployment was noted in Europe, Africa and the Americas. Increased deployment of skilled workers also contributed to higher OFWw remittances.
Meanwhile, in the financial account, the January–August 2002 portfolio investment account reversed to a net inflow of $925 million from a net outflow of $300 million in the same period in 2001 following higher non-residents’ investments largely in government-issued medium-term bonds. In particular, investments in debt securities posted a net inflow of $682 million compared to a net outflow of $204 million during the same period a year ago. Non-residents’ investments in equity securities also rose by 10.2 percent to $367 million, indicating a resurgence of investor confidence in the local equities market.
Similarly, non-residents’ investments in direct equity capital almost tripled to $815 million from $286 million in the same period last year. The bulk of these capital infusions represented inward investment by a Japanese firm for a local brewery company. Major sources of direct investments apart from Japan were the U.S., Singapore, U.K. and the Netherlands.
Meanwhile, the net outflow in the other investment account expanded by 27.3 percent to $4.835 billion on account mainly of higher withdrawal by non-residents from their FCDU accounts in local banks, and net loan repayments. Increased net deposits abroad by resident non-banks, majority of which were corporations involved in build-operate-transfer schemes, also contributed to the net outflow in the other investments account.
As of end-Aug. 2002, the BSP’s GIR rose to $16.1 billion, 3.1 percent higher than the end-December level of $15.7 billion. The BSP’s GIR could suffice to cover 5.1 months’ worth of imports of goods and payment of services and income. Using other reserve coverage measures, the level of reserves was about 3.0 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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