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THE
balance of payments (BOP) posted a huge surplus in July,
exceeding $1 billion to $1.34 billion, dwarfing the
surplus in June of only $834 million.
This was
the largest surplus since January 2006, when $1.93
billion was accumulated in just one month.
As a
result, the January to July surplus stood at $4.54
billion, a new record high.
This
also makes imperative the revision of the target BOP
surplus of just $2.9 billion this year, a revision that
the Bangko Sentral ng Pilipinas (BSP) has already
started to do.
“The
large BOP surplus was due to sustained overseas Filipino
remittances, significant increase in foreign portfolio
inflows and large improvement in the balance of trade
with higher exports,” BSP Governor Amando M. Tetangco
Jr. said in a mobile phone message.
According to Tetangco, the surplus could have been
higher in the period had they and the national
government not paid their respective foreign debts ahead
of maturity.
The BSP
has thus far prepaid a total $805 million while the
national government bought back some $126 million in
so-called Brady bonds.
These
were sovereign IOUs the government issued in the 1980s
when the country’s external sector was under severe
stress, requiring the restructuring of hundreds of
millions that foreign inflows at that time could not
cover.
The
Bradys also cost the national government an arm and a
leg in terms of debt service, putting even more strain
on the already strained government capacity to meet its
obligations.
This
time, however, foreign inflows poured inward in copious
volumes, attracted by the country’s continuously
improving macroeconomic fundamentals.
Tetangco
reported that portfolio or “hot” money flows similarly
poured inward, totaling $1.1 billion on net basis at
end-July.
While
less desirable than foreign direct investments that are
poured as equity capital in long-term economic
activities in the country, the “hot” money flows
nevertheless mirror foreign investor sentiment about the
Philippines and its market.
According to Tetangco, the foreign fund managers were
attracted by large initial and follow-on share offerings
that include, for instance, those of Aboitiz Power
Corp., GMA Holdings Inc. and Vista Land and Lifescapes
Inc.
Similarly cited was the 20-percent sale of the
shareholdings of the Philippine National Oil Co. in the
Energy Development Corp., a subsidiary.
“The
easing of inflation to 2.3 percent in June from 2.4
percent in May and the BSP’s twin moves adjusting its
policy rates downward and removing the tiering system on
bank placements also helped sustain foreign investor
interest.
“These
flows also defied news on the government’s ability to
meet its fiscal targets for the year and the huge losses
in Wall Street caused by housing and credit-market
concerns,” Tetangco said.
Gross
portfolio outflows in the first seven months totaled
only $7.01 billion against growth inflows totaling
$10.528 billion. |
