BSP Governor Rafael B. Buenaventura reported today that the country’s balance of payments (BOP) in the first seven months of 2002 yielded a $1,084 million surplus, a reversal of the $917 million deficit posted in the same period last year. This favorable development was realized on account mainly of the robust performance of the current account.
The surplus in the current account yielded a more than twofold increase to $3,396 million in January-July 2002. Largely contributing to this positive development was the higher surplus in the trade-in-goods account, and the lower net outflow in the services account. The trade-in-goods and services accounts posted a combined surplus of $564 million, which compared favorably with the $357 million deficit in 2001. The substantial increase in the net income account surplus to $2,564 million also helped strengthen the current account balance.
Exports posted double-digit growth for four straight months of 2002 after fourteen months of lackluster performance. Exports expanded by 23.6 percent in July to reach $3,134 million, the highest level in 18 months. This favorable development brought the year-to-date exports to $19,394 million or 7.5 percent higher than last year’s level. Higher demand for Philippine goods from the Netherlands and some East Asian countries such as Singapore, Taiwan, Hong Kong, Malaysia and China made up for the slack in exports to the U.S. and Japan.
Imports of goods climbed for the sixth consecutive month since February following increased purchases of raw materials and capital goods, which taken together, comprise more than four-fifths of total imports.
Imports for January-July were up by 5.8 percent at $18,242 million. This was a reversal of the 0.9 percent decline registered in 2001. The import growth reflected the sustained domestic demand and the rebound in export amid strong demand in Asia. As a leading indicator, the positive import growth augurs well for the manufacturing sector in the remaining months of 2002.
Remittances from overseas Filipino workers (OFWs), consistently a major source of foreign exchange earnings, expanded by 24.8 percent in January-July 2002 from the level a year-ago to reach $4.264 billion. This brought the income account to a surplus of $2.564 billion, or an increase of 69.7 percent from the year-ago level. Behind this positive development was the 4.3 percent rise in the number of deployed new hires and rehires OFWs during the review period. The growth in OFW deployment was noted in the Middle East, Europe, and Asia. However, with the emerging trend towards “localization” and the economic slowdown experienced in some of the countries where Filipino workers are deployed, the government continues to intensify its marketing efforts to augment the hiring of Filipino skills abroad. In the next three years, higher remittances are anticipated with the expanded hiring of OFWs in the medical field.
Meanwhile, the trade-in-services account in January-July 2002 posted a lower net outflow of $588 million. The 49.4 percent narrowing of the deficit was traced to lower net payments for transportation services and for miscellaneous business, professional and technical services. Increased net receipts from travel services, which rose by 75.0 percent to $581 million, owing to the higher rate of decline in travel payments relative to that of travel receipts also contributed to the improvement in the trade-in-services account. The lower travel payments reflected in part the weaker peso and the government program to promote domestic tourism among local residents. The government continues to pursue an aggressive promotion blitz through new international marketing campaigns to showcase the country’s tourism attractions.
The net outflow in the capital and financial account increased by 5.3 percent to $2,576 million during the period in review. This developed on account of higher net outflow of other investments and lower net inflows of direct investments despite the reversal of the portfolio investment account to a net inflow of $1,301 million from a net outflow of $182 million last year.
Portfolio investments for the first seven months of 2002 reversed to a net inflow of $1.301 billion from a net outflow of $182 million in 2001 following increased non-residents’ investments in resident-issued foreign denominated debt securities, particularly government-issued medium-term bonds. Non-residents’ investments in equity securities also rose by 13.0 percent to $356 million, indicating resurgence of investor confidence in the local equities market and shift in the investors’ preference to equity securities following the relatively lower yield on bonds and other domestic financial instruments.
Non-residents’ investments in equity capital increased by almost threefold to $760 million during the period in review following the investment of $544 million worth of shares by a Japanese firm in a local brewery company in March 2002. The rest was directed to other manufacturing companies, financial institutions and transport and storage services. Other major sources of direct investments were the U.S., Singapore, U.K and the Netherlands.
The net outflow in the other investment account expanded by 32.5 percent to $4.537 billion during the review period. This developed on account mainly of the higher net deposits abroad by resident non-banks, majority of which were corporations involved in build-operate-transfer scheme, to cover foreign-related obligations. Payments arising from maturing non-residents’ placements to local banks also contributed to the net outflow in other investments.
As of end-July 2002, the BSP’s GIR rose to $16.1 billion, 2.9 percent higher vis-à-vis the end-December level of $15.7 billion. The BSP’s GIR was adequate 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 3.1 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.