October BOP brings up surplus past $2-B target

MANILA, Philippines - The country’s balance of payments (BOP) position has surpassed the full-year target of $2 billion after posting a surplus for the second straight month in October, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Governor Amando Tetangco Jr. said the country recorded a surplus of $469 million in October from only $24 million in the same month last year.

This was the second straight month the Philippines recorded a BOP surplus after registering a surplus of $219 million in September from a deficit of $450 million in August. The surplus last month was the highest since the $485 million recorded in June.

Tetangco said the October surplus came from the deposits of the national government of the proceeds from foreign loans and income from investments of BSP assets.

On the other side of the equation, he explained outflows resulted from the payment of national government debt that partially offset the total inflows.

“But still on a net basis, there was an increase that led to the BOP surplus for October,” Tetangco said.

The BOP shows a summary of a country’s transactions with the rest of the world. Components include trade, foreign direct and portfolio investments, and even remittances from Filipinos abroad.

A surplus means more money went into the economy, while a deficit means otherwise.

The BSP chief said the surplus in October brought the country’s BOP position to a surplus of $2.27 billion in the first 10 months, a complete reversal of the $3.41 billion deficit incurred in the same period last year.

The figure exceeded the $2 billion BOP surplus target set by the BSP for the year from a deficit of $2.86 billion last year.

Tetangco said the impending interest rate normalization in the US next month continued to create uncertainties in the global financial market.

“The Fed lift off has been expected for some time now and it still has to happen. In the meantime, the financial markets in anticipation of the lift off, has experienced some volatilities,” he said.

The US Federal Reserve is expected to finally tweak its near-zero interest rates in December.

“If there is an actual liftoff, there could still be some reactions but I think since the markets have been expecting this, the impact should not be that significant. In our case, because investors tend to discriminate between economies that are doing very well in macro economic side and others, this would benefit us,” he said.

Tetangco cited the country’s strong macro economic fundamentals amid the sustained gross domestic product (GDP) growth, benign inflation environment, robust banking system as well as sufficient gross international reserves (GIR).

BSP Deputy Governor Diwa Guinigundo said the country’s BOP surplus could settle near the $2 billion target set by the central bank despite the impact of the lift-off in the US in December.

“Yes, in fact we can be positive that BOP will remain in positive territory perhaps very close to $2 billion,” Guinigundo said.

Although investors have already factored in the interest rate hike in the US next month, he explained there could still be a knee jerk reaction causing funds to move out of emerging market economies.

“The knee jerk reaction is to move out of emerging markets like the Philippines but we always say that the strong macroeconomic fundamentals can be a good factor for keeping capital in the Philippines,” he said.