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BOP Surplus in December Narrows Down the Overall Deficit in 2001 to $192 Million

03.21.2002

BSP Governor Rafael B. Buenaventura reported today that the balance of payments for December yielded a surplus of $873 million. This favorable development narrowed down the full-year overall BOP deficit to $192 million from $513 million last year.

Despite the slowdown in external demand, the current account remained in surplus at $4.504 billion. This was, however, lower by 46.8 percent than the previous year’s level. The contraction in the current account surplus developed following lower receipts from trade-in-goods even as the services account yielded lower net outflows and as the surplus in the income account rose slightly.

Exports contracted by 16.2 percent [1] following the slack in demand from the country’s major trading partners, namely the U.S. And Japan. Specifically, exports of electronics, which experienced declines in both volume and price, shrank by 24.7 percent. Meanwhile, exports of garments dropped by 6.2 percent. By contrast, exports of machinery and transport equipment managed to grow by 3.8 percent on account of strong sales of automotive accessories and parts. Electronics, machinery and transport equipment and garments were the country’s top three export commodities.

Governor Buenaventura added that imports in 2001 fell across the board by 6.2 percent.[1] all major commodity groups dropped, with imports of mineral fuels and lubricants posting the highest decline of 13.0 percent due to the lower average price of petroleum in spite of the 4.3 percent increase in import volume.

Meanwhile, the income account continued to be in surplus in 2001 at $3.252 billion. This was higher by 1.1 percent than last year’s surplus following the increase in remittances of overseas Filipino workers (OFWs) which comprised nearly 85 percent of gross income receipts. OFW remittances rose from $6.050 billion to $6.235 billion in 2001; however, the 3.1 percent increase was attributed mainly to the expanded coverage of the monitoring system, which—aside from commercial banks—now includes foreign exchange corporations and thrift banks. Without the expansion in coverage, receipts from OFWs amounted to only $5.56 billion or a drop of 8.1 percent from last year’s level. The contraction was in line with the decrease in the number of deployed Filipinos working abroad from 4.8 million in 2000 to 4.7 million in 2001. [2]

Meanwhile, the net outflow in trade-in-services declined by 8.2 percent to $1.94 billion despite lower travel receipts arising from perceived security concerns in the south and the travel scare that followed the September U.S. Terrorist attacks. The reduction in the deficit was due mainly to lower net outflows for freight (following the decline in merchandise imports), royalties and fees, financial services and other business services.

Governor Buenaventura also noted that, in spite of the generally heightened aversion of investors to risks in 2001, foreign direct investments into the country continued, as indicated by the 44.9 percent increase in net inflows to $1.95 billion during the year. The bulk of direct investments—which came from the U.S., Japan, France and Singapore—was directed to the manufacturing and telecommunication sectors as well as financial institutions.

Meanwhile, non-residents’ investments in equities and in domestic-issued government instruments as well as residents’ divestments of their investments abroad contributed to a robust net portfolio investment inflow of $1.399 billion. This was a turnaround from the $113 million net outflow recorded a year ago.

The other investments account remained in deficit although it was significantly lower than last year’s level. The improvement was due largely to the notable decline in residents’ trade receivables, offsetting the higher loan repayments by domestic banks to foreign banks abroad, and lower net withdrawals by local banks of their deposits with foreign banks.

As of end-December 2001, gross international reserves reached $15.7 billion, sufficient to cover 5.0 months’ imports of goods and payments of services and income. Reserves were also equivalent to more than twice the level of the country’s short-term external debt based on original maturity, or alternatively 1.3 times the amount of short-term external debt based on residual maturity.

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[1] Based on National Statistics Office (NSO) data, exports and imports of goods declined by 15.6 percent and 5.8 percent, respectively. For BOP purposes, the NSO’s foreign trade statistics are adjusted to exclude those trade transactions that do not involve change in ownership.

[2] Based on a survey conducted by the Commission on Filipinos Overseas, an attached agency of the Department of Foreign Affairs, in coordination with the Philippine Overseas Employment Administration.

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