Tuesday, 23 February 2010

Despite crisis, Manila racks up $6.2b in current account surplus

by Roderick T. dela Cruz
Manila Standard

THE current account surplus hit $6.2 billion last year on the back of robust remittances and income from business process outsourcing and tourism despite the global financial crisis, the central bank said over the weekend.

The total was 48 percent higher than the $4.2-billion surplus in 2008 and represented 3.8 percent of the gross domestic product last year, Bangko Sentral Deputy Governor Diwa Guinigundo said.

By contrast, the Philippines recorded a $4.9-billion deficit at the start of the Asian currency crisis in 1997 as a result of weak inflows.

A strong current account surplus indicates a country’s ability to live within its income from trade, net factor income (such as interest payments and dividends) and net transfer payments (such as foreign aid).

A current account surplus helps support the peso, which is expected to trade at 46 to 48 against the dollar this year.

The Philippines had a merchandise trade deficit of $4.09 billion in the first 11 months of 2009, but that was offset by revenue from business process outsourcing amounting to $7.3 billion, the central bank said.

The Tourism Department said foreign tourists had been infusing $3 billion to $5 billion in receipts annually.

And the money sent home by Filipinos abroad rose 5.6 percent to $17.348 billion last year despite the economic slowdown in the countries they were working in, the central bank said.

The current account is one of the two major components of the balance of payments, the other being the capital and financial account. The current account includes external merchandise trade, services, remittances (income account) and current transfers.

The total balance of payments resulted in a surplus of $5.295 billion last year compared with $89 million in 2008.

“In 2010 the current account is expected to stabilize at a lower level,” Guinigundo said.

He said the surplus would hit only $4.5 billion or 2.5 percent of GDP because of higher imports and a bigger trade deficit as a result of the global economic recovery.

A double-digit drop in imports actually trimmed the trade deficit to $4.09 billion in the year to November 2009 against $7.042 billion in the same period the year before.

Guinigundo said the current account would be supported by remittances and income from business process outsourcing and tourism. Remittances would increase by 5 or 6 percent this year, he said.

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