By Joann Santiago
MANILA, June 19 (PNA) — The Philippines balance of payment (BOP) position last May reversed to positive territory after it turned in USD 373 million surplus from month-ago’s USD 19 million deficit.
Data released by the Bangko Sentral ng Pilipinas (BSP) Thursday showed that the surplus in the fifth month of 2014 is higher than year-ago’s USD 75 million surplus.
The surplus enabled the BOP deficit in the first five months of the year to USD 4.12 billion from the USD 4.49 billion as of last April.
Year-on-year, the BOP deficit in the first five months of the year is a reversal from the USD 1.89 billion surplus in end-May 2013.
The central bank’s BOP surplus target for 2014 is USD 3 billion.
BOP is the summary of an economy’s over-all transactions with the rest of the world.
Monetary officials review their economic targets twice a year, in April and November, but they have yet to announce their new BOP target for the year.
Earlier, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said he is confident that the current account component of the BOP will remain in surplus.
“On the CA (current account), we continue to expect a surplus owing to remittances and receipts from BPO (business process outsourcing) sector that we expect will remain healthy,” he said.
BOP has three components namely the current account, which involves the remittances from Filipinos overseas and income of the BPO sector among others; the capital account, which include capital transfers and acquisition and disposal of non-financial assets; and financial account, which include direct and portfolio investments.
Cash remittances in the first quarter of 2014 grew by six percent year-on-year to USD 5.48 billion from year-ago’s USD 5.2 billion.
On the other hand, foreign portfolio investments have been posting outflows mostly in the first quarter of the year in line with investors’ sentiment on emerging markets (EMs) like the Philippines vis-à-vis the series of cut in the Federal Reserve’s stimulus program.
The Fed’s third quantitative easing program, otherwise known as QE3, has been cut by a total of USD 50 billion from the original level of USD 85 billion as US monetary officials see the need to slowly lower their securities purchases given the improvements in the world’s largest economy.
“We observed that net portfolio investments have started to register net inflows in April and May, suggesting that investors have started to distinguish EMs with better macroeconomic fundamentals and prospects,” Tetangco said.
The central bank chief earlier allayed fears regarding the outflows in the foreign portfolio investments, otherwise known as hot money due to the fast pace it comes in and out of the economy, citing that investors will eventually see which among the EMs are fundamentally strong.
There are still hot money outflows registered last April and May but only small compared to the ones registered in the first quarter of the year. (PNA)