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Current Account Surplus at $2.757 Billion for the First Ten Months of 2001

01.24.2002

BSP Governor Rafael Buenaventura reported today that the current account yielded a surplus of $2.757 billion for January-October 2001 following the surplus in the trade-in-goods account and net receipts in the income account. However, the current account surplus was 59.1 percent lower than the previous year’s level.

The trade-in-goods balance remained in surplus, albeit below the level last year due to lower exports of goods even as imports also declined. Exports contracted by 14.6 percent following the slowdown in demand from the country’s major trading partners. Electronics, which accounted for more than half of the country’s exports, fell by 23.1 percent while exports of garments dropped by 3.9 percent. Exports of machinery and transport equipment, however, remained strong, posting a year-to-date growth of 4.5 percent. Electronics, garments, and machinery and transport equipment remained the country’s leading exports.

Governor Buenaventura added that during the review period, imports of goods fell by 4.4 percent. Imports declined across the board, with imports of capital goods as well as of raw materials and intermediate goods posting the biggest declines of 5.4 percent and 3.0 percent, respectively.

He noted, however, that inflows of foreign direct investment continued despite the global economic slowdown as well as uncertainties brought about by the September 11 terrorist attack in the U.S. and its aftermath. For the first ten months of the year, net inflows of foreign direct investments amounted to $1.4 billion. This was, however, lower than the $1.8 billion net inflow last year. The bulk of direct investments—which came from and the U.S., Japan, France and Singapore—was directed mainly to the manufacturing and telecommunication sectors as well as financial institutions.

Meanwhile, the $516 million net inflow in September reversed the year-to date balance of the portfolio investments account to a surplus of $297 million. This was a turnaround of the net outflow of $68 million recorded a year ago. The September net inflow was largely due to the divestment by residents of their holdings of foreign-issued debt securities.

On the other hand, the other investments account posted a reduced net outflow of $5.152 billion on account mainly of lower net trade receivables. This developed despite lower net inflows of loans as higher repayments by the Government and the banking sector partly offset the private sector loan availments to finance power and telecommunication projects.

These developments altogether contributed to a balance of payments deficit of $1.516 billion for the first ten months of 2001. This level was higher than the deficit of $950 million during the comparable period in 2000.

As of end-October 2001, gross international reserves stood at $14.4 billion, sufficient to cover 4.3 months’ import of goods and payments of services and income. Reserves were equivalent to more than twice the level of the country’s short-term external debt based on original maturity, or alternatively 1.2 times the amount of short-term external debt based on residual maturity.

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