Higher BOP surplus, remittance forecast set

The Bangko Sentral ng Pilipinas (BSP) raised its forecast for the country’s dollar surplus, citing robust remittance inflows and foreign investments.

During the government’s Mid-Year Economic Briefing, BSP Governor Amando Tetangco Jr. said the country’s balance of payments (BOP) surplus is estimated to reach $4-billion to $5-billion this year, better than the central bank’s initial forecast of $700 million.

For next year, the country’s dollar surplus would reach $3 billion to $4 billion, he said.

“The BOP turned out to be better than originally [seen] in terms of current account as well as OFW remittance. This is also the time when BSP would normally review the BOP forecast,” Tetangco told reporters.

In its latest report, the BSP said the BOP registered a $53-million surplus in August, lower than the $506 million the month before due to the government’s payment of maturing obligations.

This brought the BOP surplus to $2.775 billion in the first eight months this year, slightly higher than the $2.722 billion at end-July.

The BOP summarizes the country’s economic transactions with the rest of the world to include trade, investments, and other income transfers. A surplus is viewed in a positive light since this means the country is earning more dollars, which helps strengthen the peso and slow down inflation.

The sustained surplus in August was supported by remittances, the government’s foreign commercial borrowing in July, as well as foreign investment inflows and earnings from the service sector, particularly the business process outsourcing (BPO) and tourism industries.

4-percent remittance growth

The BSP also raised its forecast for overseas Filipino worker (OFW) remittances to 4 percent this year, from an earlier estimate of flat growth.

Remittances contribute 10 percent of the country’s gross domestic product (GDP), an indicator of economic output.

“We have emerging figures with respect to remittances. We are now looking at 4 percent increase in 2009 over 2008. So in dollar terms that would total to $17.1 billion versus $16.4 billion in 2008,” Tetangco said.

The major sources of remittances are the US, Canada, Saudi Arabia, UK, Japan, Singapore, United Arab Emirates, Italy and Germany.

Money sent home by OFWs accelerated by 9.3 percent to $1.5 billion in July, bringing the seven-month tally to $10.0 billion, or 3.8 percent higher than the $9.608 billion in the same period last year.

Foreign direct investment (FDI) inflows increased by 33.8 percent to $1.2 billion at end-July compared with $926 million last year due to the capital infusion of a US-based beverage firm in its local operations.

The BSP is still reviewing its forecast for the country’s capital and financial accounts, which mainly consist of FDI, foreign portfolio investments, loans and debt repayments.

On the current account side of the BOP, the central bank expects $6 billion this year despite the projected 20-percent contraction of exports.

Exports, which comprises a third of Philippine economic output, dropped 21 percent in August to $3.472 billion from $4.395 billion last year. The August performance caused exports to drop 30.3 percent to $24.004 billion in the first eight months. –Maricel E. Burgonio, Manila Times