RP posts lower CA surplus of $1.01B in 4 months

The country registered a much lower current account surplus of $1.014 billion in the first four months of the year, compared to $1.828 billion in the same period last year, reflecting the impact of the slowdown in the economies of its two major markets, the US and Japan.

As a result, the country’s balance of payments (BOP) from January to April this year, yielded a deficit of $755 million, a reversal of the year-ago surplus of $803 million.

The Bangko Sentral ng Pilipinas (BSP) said the BOP position was due to the lower net inflows in the capital and financial account and the highest net outflow of portfolio investments.

The current account is the aggregate balance of goods, services and transfers, while the capital and financial account covers all transactions that involve the receipt or payment of capital transfers as well as investments and loans. These two accounts make up the BOP.

The BOP, on the other hand, summarizes for a specific period, the economic transactions of an economy’s residents with the rest of the world.

The BSP said the current surplus from January to April was posted despite lower export earnings of $902 million as compared to last year’s $949 million.

During the period, merchandise trade surplus was matched by the drop in imports. Earnings from exports dropped by 4.1 percent to $10.518 billion from $10.971 billion during the same period last year. The top three export earners continued to be machinery and transport equipment, garments, and electronics which comprise more than 60 percent of export revenues.

Imports also declined by 4.1 percent to $9.616 billion from $10.022 billion during the same period last year as there was a noted contraction in all commodity groups, except for mineral fuels and lubricants.

The BSP noted that imports of capital goods, consumer goods as well as raw materials and intermediate goods dropped by 9.4 percent, 2.4 percent, and 0.9 percent, respectively, reflecting the economic slump.

The BSP added that net inflows of foreign direct investments dropped 54.5 percent to $353 million from last year’s $776 million and these were channeled to the telecommunications, banking and finance, manufacturing real estate and transportation sectors.

In contrast, there was a net outflow of portfolio investments or "hot money" totaling $1.628 billion for the first four months of the year, surging by 1.340 percent from the $113 million outflow in the same period in 2000.

The BSP said the outflow was due primarily to higher repayments on maturing bonds and notes. The outflow stemming from repayments of debt securities outpaced the net inflow of investments in the local equities market, the central bank said.

Moreover, the other investments account registered a 62.4 percent increase in outflow to $1.772 billion compared to $1.091 billion in the previous year, largely due to lower "reflows" of currencies and deposits of residents with offshore bank deposits.

The BSP said that as of end-April, the country’s gross international reserves stood at $14.44 billion, enough to cover 4.3 months worth of imports and payment of services and income. This is enough to cover more than twice the country’s level of short-term foreign exchange liabilities, according to the BSP.