March 18, 2018, 10:05 am
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BOP rebounds in Q2

The country’s balance of payments position (BOP) rebounded in the second quarter of this year, yielding a surplus of $289 million after posting a deficit in the first quarter of the year. 

But this was still lower than the $843 million surplus registered in the same quarter last year due to less net inflows or net borrowing by residents from the rest of the world in the financial account even as the current account reversed to a surplus. 

Net inflows in the financial account declined to $688 million due mainly to net outflows in the other investment account and the lower net inflows of direct investments. 

Residents repaid and prepaid their external debt and some invested in foreign equities. 

Meanwhile, the current account registered a surplus of $15 million from a deficit of $1.3 billion in the second quarter. 

Global economic conditions continued to improve as indicators of activity signaled sustained expansion in the US, euro area, and China even with slower growth in Japan and India. 

Overall growth prospects for the global economy remained broadly positive which helped improve the country’s external trade and sustain investor confidence on the Philippine economy.

The current account registered a surplus of $15 million in the second quarter of this year, a reversal from the $1.3 billion deficit recorded during the same period last year. 

This development was brought about mainly by higher net receipts in the trade-in-services, and primary and secondary income accounts which mitigated the widening trade-in-goods deficit during the quarter.

The trade-in-goods deficit increased to $9.7 billion in the second quarter of this year from $9.5 billion even as exports of goods started to recover. 

Exports of goods rose by 17.6 percent to $12.2 billion from $10.4 billion with increases recorded across all major commodity groups, except petroleum products, on the back of increased demand from the country’s major trading partners. 

Imports of goods recorded $22 billion, higher by 10.3 percent than the $19.9 billion due mainly to increased imports of raw materials and intermediate goods.

Net receipts in trade-in-services expanded by 69 percent to reach $2.3 billion, compared to the $1.3 billion net receipts last year. 

The upturn was attributed largely to lower net payments in travel, transport, and financial services and higher net receipts in technical, trade-related, and other business services, and computer services. 

These gains more than compensated for lower net receipts in manufacturing services as well as higher net payments in charges for the use of intellectual property. 

Export revenues in business process outsourcing services amounted to $5.5 billion, or an increment of 7 percent from the $5.1 billion receipts in Q2 2016.

The primary income account posted net receipts of $1 billion, higher than the $696 million net receipts in Q2 2016. 

The 44.8 percent increment was due largely to lower net payments of investment income arising mainly from decreased interest payments on bonds issued by the National Government (NG) coupled with lower dividends paid to non-resident portfolio investors which mitigated the increased reinvested earnings in favor of  foreign direct investors.

Net receipts in the capital account improved to $37 million in Q2 2017 from $26 million in Q2 2016. Inflows arising from the NG’s receipts in other capital transfers were higher during the quarter.

The financial account registered net inflows of $688 million in the second quarter of 2017, down by 70.2 percent than the level posted in the same quarter last year. 

The reduction in net inflows was brought about mainly by the other investment account which realized net outflows, a turnaround from the net inflows recorded in Q2 2016, and the decrease in net inflows of direct investments during the quarter. 

These developments partly dampened the reversal of the portfolio investment account to net inflows from net outflows. 

Direct investments recorded net inflows of $2.1 billion in Q2 2017, lower than the $2.4 billion net inflows recorded in the same quarter a year ago. 

This developed as the decline in inflows more than offset the decline in outflows.  In particular, FDI dropped by 25.7 percent to $2.1 billion. 

By component, non-residents’ net placements of equity capital in local affiliates fell by 95.5 percent to $40 million. 

Gross placements originated mostly from the US, Japan, Hongkong, Singapore and Taiwan. 

These were channeled to the real estate; financial and insurance; electricity, gas, steam and air conditioning supply; wholesale and retail trade; and manufacturing activities. 

The portfolio investment account registered net inflows of $244 million in Q2 2017, a reversal from the $880 million net outflows in Q2 2016 on account of the 72.7 percent decline in residents’ net acquisition of financial assets, coupled with the 59.2 percent increase in residents’ net incurrence of liabilities, or foreign portfolio investments, which amounted to $585 million.

For the period January-June 2017, the BOP posted a deficit amounting to $706 million from a surplus of $634 million in the comparable period in 2016.

The country’s gross international reserves (GIR) amounted to $81.3 billion as of end-June 2017, higher than the $80.9 billion level as of end-March 2017 but lower than the $85.3 billion level as of end-June 2016. 

At this level, reserves could sufficiently cover 8.5 months’ worth of imports of goods and payments of services and income. It was also equivalent to 5.6 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.
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