BSP to review external payments position

MANILA, Philippines -  The Bangko Sentral ng Pilipinas (BSP) is set to review next month the country’s projected external payments position for 2011 in light of the major impact of tensions in the Middle East and North African (MENA) states as well as the devastating earthquake and tsunami in Japan on remittances sent home by overseas Filipino workers (OFWs).

BSP Governor Amando M. Tetangco Jr. said in a text message to reporters that the country’s projected external payments position including gross international reserves (GIR) and the balance of payments (BOP) surplus are reviewed during April and October every year to take into consideration latest indicators and developments.

Tetangco said the projected eight percent growth in OFW remittances would be reviewed in light of the violent protests in Egypt, Libya, Yemen, Bahrain, and other MENA states as well as the devastating magnitude 8.9 earthquake in Japan.

“We will consider all the data or indicators that we have on both current and (likely) future trends as we scan the operating environment. More directly, even as there are pockets of vulnerabilities in some MENA states due to social unrest, higher oil prices boost the economies of oil producing countries in the Middle East. So there are offsets and counterpoints,” he said.

The BSP sees the country’s GIR hitting a new record level of $68 billion to $70 billion and the BOP surplus ranging between $6 billion and $8 billion this year. Money sent home by OFWs would grow eight percent to breach the $20 billion level this year.

The country’s GIR – the sum of all foreign exchange flowing into the country – surged 36.8 percent to a record level $62.371 billion last year from $45.03 billion in 2009 while the BOP – the difference of foreign exchange inflows and outflows – posted a new all-time high surplus of $14.4 billion from $6.42 billion.

OFW remittances went up by 8.2 percent to hit a new record level of $18.76 billion last year from $17.348 billion in 2009 due to the continued demand of skilled Filipino workers abroad.

Countries in the Middle East accounted for about 16 percent or $2.96 billion of the total OFW remittances last year. More than half or $1.644 billion came from Saudi Arabia followed by the United Arab Emirates with $776.3 million, Qatar with $248.8 million, Bahrain with $167.28 million, Kuwait with $106.5 million, Israel with $67.3 million, Oman with $66.76 million, and others.

On the other hand, Asian countries accounted for 12.6 percent to $2.36 billion of the total amount of money sent home by OFWs last year. Japan was the major contributor with $883 million followed by Singapore with $734.13 million, Hong Kong with $362.5 million, and Taiwan with $121.7 million.

He pointed out that developments abroad play a crucial role in the country’s external payments position.

“Global confidence and risk tolerance are key in determining future developments, particularly insofar as our external payments are concerned,” Tetangco added.

Aside from the tension in MENA states, Tetangco told reporters that monetary authorities would also monitor the impact of the powerful earthquake in Japan on the country’s trade and average inflation.

“The magnitude of the impact on the Japanese economy will of course be clearer as the days unfold. We are monitoring the impact of the events in Japan on global aggregate demand (via trade) and on inflation dynamics (via commodities),” he added.

He explained that any adverse impact on the Japanese economy would be temporary as recovery and reconstruction efforts are now underway.

“We are hoping that the global recovery will not be impeded but rather concerns will be focused in sharper relief towards climate or environmental issues, boosting instead those industries or sectors that are involved in these matters,” he said.