BSP says ‘worst is over’ for PH economy

by Daxim L. Lucas, Philippine Daily Inquirer, 21 Nov 2020

The central bank’s view that the worst is over for the pandemic-ravaged local economy has been reinforced by the latest data about the movement of money in and out of Philippines during the third quarter.

Thus said Bangko Sentral ng Pilipinas (BSP) Gov. Benjamin Diokno, who on Friday highlighted the recent balance of payments, dollar remittance and foreign direct investment numbers as potential leading indicators of a coming rebound in growth.

The adverse impact of the COVID-19 pandemic on the country’s external accounts may have already reached its peak during the second quarter of the year, according to the BSP official.

“As we entered into the third quarter of the year, preliminary data from July to September suggest that the worst is over,” he said in an online press briefing. “As we monitor the impact of the pandemic on the external accounts, it can be observed that the effects were mostly felt during the second quarter of 2020, particularly during the months of April and May, as stricter lockdown measures were imposed by the government as part of its efforts to fight the spread of the virus.”

The country’s overall balance-of-payments position— the net tally of dollars moving in or out of the local economy —posted a surplus of $2.1 billion in September 2020, bringing the year-to-date surplus position to $6.9 billion.

The cumulative surplus of almost $7 billion was higher than the $5.6-billion surplus recorded in the same period a year ago.

Based on preliminary data, the current surplus was supported mainly by higher net foreign borrowings by the national government and lower merchandise trade deficit along with net inflows from trade in services, overseas Filipino remittances and foreign direct investments.

Expatriate Filipinos’ cash remittances coursed through banks rose by 9.3 percent to $2.6 billion in September 2020 from $2.38 billion in September 2019. This increase was due to the growth in remittances from both land- ($2.03 billion) and sea-based ($570 million) workers, which rose by 10.2 percent and 6.5 percent, respectively.

For the period January-September 2020, dollar remittances amounted to $21.89 billion, only 1.4 percent less than the $22.19 billion registered in the comparative period last year. This is much better than the 5-percent contraction earlier projected by the central bank.

Meanwhile, foreign direct investment net inflows continued its growth momentum in August 2020, up by 46.9 percent year-on-year, to reach $637 million from $434 million in August 2019.

Net foreign direct investment inflows increased for the fourth consecutive month owing to investors’ renewed confidence as the central bank’s accommodative monetary policy stance and the national government’s fiscal support to mitigate the impact of COVID-19 gained traction, along with the easing of lockdown measures starting in the third quarter.

On a cumulative basis, foreign direct investment net inflows reached $4.4 billion in the first eight months of 2020. Behind this development was the increase in net equity capital investments, which posted a cumulative growth of 99.6 percent to $1.1 billion from $550 million in the same period in 2019.