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    Technical Notes on the Revisions in the Balance of Payments

    As a matter of practice, annual revisions reflect data updates as well as changes in conceptual treatments and classifications following outcome of statistical review. Meanwhile, quarterly revisions involve mostly data updates.

    Below are the specific accounts revised for 1999-2002 and the underlying reasons behind the changes:

    A. Current Account

    1. Trade in Goods

    Data on imports of goods were revised for years 2000-2002 following the upward adjustments made by the National Statistics Office (NSO) on imports of consigned raw materials for electronics. The revised data reflected the results of the joint BSP-NSO survey of imports.

    2. Services

    Final data on freight and insurance based on the revised NSO import data were reflected in the BOP.

    3. Income

    a. Revisions in the reinvested earnings reflected the final data of multinational companies (see discussion of the same item in the Capital and Financial account). The revised data showed operating losses in dollar terms instead of profit as earlier estimated.

    (NOTE: Ideally, reinvested earnings may be estimated using indicators of profitability on a monthly basis. However, because of absence of good and more frequently generated profitability indicators, export trends were used as proxy indicators of reinvested earnings. For the years 1998 and 1999, export trends served as a good indicator of profitability with the preliminary estimates approximating the actual data. However, for 2000 and 2001, actual data on reinvested earnings were significantly different compared to estimates. Thus, releases of BOP statistics beginning April 2002 do not reflect any estimates of reinvested earnings. The difficulty of estimating reinvested earnings is common even in advanced economies where large errors between preliminary estimates and final data on reinvested earnings were observed despite use of enterprise surveys.)

    b. Interest expense on medium- and long-term debt reflected the exclusion of BSP’s foreign currency denominated interest payments to residents.

    c. The updated data on investment income included earnings of residents from investment in foreign government- issued debt securities.


    B. Capital and Financial Account

    1. Revisions were introduced on selected financial transactions of banks in compliance with the recommendations of the BOP and Banking missions from the IMF. These include:

    a. Exclusion of export bills and foreign bills purchased which are resident to resident transactions.

    b. Inclusion of banks’ equity capital that are converted to or maintained in pesos to make the treatment consistent with the entries in the International Investment Position (IIP) statistics.

    c. Reclassification of transactions based on the recommendations of the IMF’s banking mission that affected all categories of the financial account.

    2. Other Changes in the financial account

    a. Direct investment - reinvested earnings

    Revisions were based on financial statements of 314 and 344 multinational companies for 2000 and 2001, respectively. These companies belong to the top 5000 corporations.

    b. Portfolio investment

    i. Secondary market

    Public Corporate bond issues traded in the secondary market have been reclassified from “General Government” issues to “Others”.