BOP surplus up 51% to $9.72 billion in 9 months

MANILA, Philippines - The country’s balance of payments (BOP) surplus grew 51 percent in the first nine months of the year despite a sharp decline last month due to the reversal of foreign capital inflows amid the risk contagion from the fragile global economic environment as well as the sovereign debt crisis in Europe, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

Data released by the central bank yesterday showed that the country’s BOP surplus stood at $9.721 billion from January to September this year or $3.278 billion higher than the $6.443 billion surplus recorded in the same period last year.

The BOP refers to the difference of foreign exchange inflows and outflows on a particular period and represents the country’s transactions with the rest of the world.

Originally, the BSP sees the country’s BOP position posting a surplus of $6.7 billion this year and $4.4 billion next year. Last year, the BOP posted a record surplus of $14.4 billion on the back of strong remittances of overseas Filipinos, high earnings of the business process outsourcing (BPO) sector, sustained export growth as well as surging foreign capital flows.

As early as August, the BOP target of $6.7 billion set by the BSP was breached due to strong foreign capital flows to emerging market economies including the Philippines.

For the month of September alone, the BOP surplus reached $719 million from a surplus of $3.062 billion in the same month last year.

BSP Governor Amando M. Tetangco Jr. said the Asia Pacific region was not spared from the effects of persistent global turmoil that started with the Euro debt crisis in May, the Greece downgrade in June, the US political dilemma in July, the US downgrade in August, and the discussions leading to the Euro bailout last month.

“As uncertainty escalated, risks have intensified. The likely impact would be a break on the growth momentum and short-term fluctuations in the region’s capital flows,” Tetangco stressed.

He pointed out that regional currency movements became volatile, risk perception increased, confidence waned, and policy dilemma surfaced.

Latest data from the BSP showed that the net inflow of foreign portfolio investments or “hot money” plunged 69.7 percent to $149.68 million from $494.05 million in the same month last year but monetary authorities are convinced that emerging markets would contine to attract foreign capital inflows despite the massive outflows over the past few weeks in light of the sovereign debt crisis in Europe as well as debt concerns in the US.

“There has been some risk off in the last few days so capital has tended to flow out over the last few days. But when the dust settles it is expected that the emerging markets including the markets in Asia will continue to attract capital flows because of the good economic prospects compared to the prospects with the rest of the world as well as the other economic improvements that made the countries in Asia more resilient to crises,” Tetangco said earlier.


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