Wednesday, 15 July 2009

Philippine BOP seen at a surplus, may hit $1B by yearend

Michelle V. Remo
Philippine Daily Inquirer

MANILA, Philippines—A $1-billion surplus in the country’s balance of payments (BOP) may be expected this year, as inflows of foreign exchange appear to be healthier than initially anticipated, according to the Bangko Sentral ng Pilipinas (BSP).

In its official forecast, the BSP said the BOP would record only a $750-million surplus this year.

But BSP Governor Amando Tetangco Jr. said the projection would be reviewed. He said a BOP surplus of at least $1 billion could be a more realistic estimate.

Tetangco cited the government’s sale Tuesday of $750 million worth of global bonds.

This will help boost the country’s BOP until proceeds are fully withdrawn by the state to fund expenditure requirements, he added.

Unless the government withdraws all proceeds of the bond sale, the foreign currency inflows would support the BOP. The central bank did not take into account the government’s recent bond sale when it set its BOP forecast for 2009.

The government had no intention of selling more bonds, after it raised $1.5 billion from a bond float in January.

But the government later realized it needed more funds to fuel its expenditure program for the year, saying the crisis had caused tax collection to dwindle.

A closely watched economic indicator, BOP is the difference between the inflows and outflows of foreign currencies to and from the Philippines.

A surplus in the BOP adds to the country’s gross international reserves (GIR), or the country’s total reserves of foreign exchange. GIR indicates a country’s capacity to purchase imports, pay off foreign debts and engage in other commercial transactions with the rest of the world.

As of end-May, the country’s GIR stood at a record $39.5 billion. Monetary officials said the level of GIR indicated that the country was not suffering from any liquidity problem and had managed to stay afloat despite the global downturn.

“Latest figures already show that BOP surplus was above $2 billion, and so the full year figure could be higher than the earlier forecast of $700 million,” Tetangco told reporters on Tuesday.

According to data released earlier by the central bank, the country registered a BOP surplus of $2.14 billion in the first four months of the year.

Monetary officials said there might be net dollar outflows in the second half that could trigger a drop in the BOP surplus.

But they also said that the surplus could exceed the conservative estimate of $700 million and hit the billion-dollar mark by year’s end.

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