For the 14th consecutive year, the country’s current account recorded a surplus, bringing the balance of payments position for full year 2016 to a deficit of $420 million, a reversal of the $2.6 billion surplus registered in 2015.
The $601 million current account surplus in 2016, representing 0.2 percent of GDP, however, was 91.7 percent lower than the $7.3 billion or 2.5 percent of GDP surplus in 2015.
The decline in the current account surplus was due primarily to the widening deficit in the trade-in-goods account.
The trade-in-goods deficit for full year 2016 widened to $34.1 billion.
This was 46.2 percent higher than the $23.3 billion deficit in 2015.
Imports recorded double-digit growth at 16.6 percent while exports grew marginally by 0.6 percent.
Exports of goods totaled $43.4 billion, a modest increase from the $43.2 billion recorded in 2015.
This developed as the decline in shipments of manufactured goods and mineral products negated the growth in exports of sugar products, fruits and vegetables and coconut products.
Imports of goods increased to $77.5 billion in 2016 from the year-ago level of $66.5 billion.
The expansion in total imports was driven mainly by increases in purchases of capital goods by 41.6 percent and raw materials and intermediate goods by 16.8 percent.
These accounted for 15.5 percentage points of the 16.6 percent aggregate growth in imports, pointing to the continued expansion in the domestic economy’s capital formation and production.
Net receipts in the trade-in-services account grew by 30.6 percent to $7.1 billion in 2016, compared to the $5.5 billion net receipts recorded in 2015.
Higher net receipts were posted in computer, and technical, trade-related and other business services, which more than offset the higher net payments for insurance and pension, transport, financial, and government goods and services.
Export earnings in business process outsourcing services amounted to $20.2 billion in 2016, higher by 12.8 percent than the $17.9 billion recorded in 2015.
The primary income account registered net receipts of $2.6 billion, higher than the $1.9 billion net receipts posted in 2015.
The 39.7 percent increment stemmed from reduced net payments of investment income by 17.8 percent, notably dividend payments to foreign direct and portfolio investors on their equity and investment fund shares in resident enterprises by 15.6 percent and 12.6 percent, respectively.
Residents’ interest payments on foreign portfolio investments also declined, particularly on bonds held by non-residents which were issued by the local corporates by 23.2 percent and the NG by 7.7 percent.
Interest receipts on reserve assets which rose by 21.5 percent, also contributed to the upturn in primary income net receipts.
Net receipts in the secondary income account rose by 7.3 percent to $25 billion, boosted mainly by the 7.6 percent increase in remittances by non-resident OF workers amounting to $23.2 billion.
The country’s balance of payments position registered a deficit of $2.1 billion in the fourth quarter of 2016, a reversal of the $809 million surplus posted in the same period the previous year.
This developed as the current account reversed to a deficit during the quarter even as the financial account registered lower net outflows or net lending by residents to the rest of the world.
The deficit in the current account was due mainly to the higher deficit in trade-in-goods, combined with lower net receipts of services and primary income.
Meanwhile, the reduced net outflows in the financial account was a result of the substantial increase in net inflows of direct investments as well as the reversal of portfolio investments to net inflows from net outflows, which more than compensated for the higher net outflows in the other investment account.
Economic recovery in China remained subdued and growth prospects for Asean countries weakened due to slower manufacturing activity across the region.
Economic activity in the US and euro area remained steady and favorable business sentiment supported the continued improvement of the Japanese economy.
Lingering uncertainties arising from the uneven pace of economic growth continued to factor into the country’s external transactions, particularly the trade-in-goods account.
With the deficit recorded in the Philippine balance of payments, the country’s gross international reserves (GIR) reached $80.7 billion as of end-December 2016, significantly lower than the $86.1 billion level as of end-September 2016, but slightly higher than the end-December 2015 level.
At this level, reserves can sufficiently cover 8.9 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 5.6 times the country’s short-term external debt based on original maturity and 4 times based on residual maturity.
Cumulative net receipts in the capital account reached $102 million in 2016. This was 21.4 percent higher than the $84 million posted in 2015 due to the increase in capital transfers to financial and nonfinancial corporations, households, non-profit institutions serving households and the NG.
The financial account registered net outflows of $949 million in 2016, a decline of 58.8 percent from the $2.3 billion net outflows in 2015.
This was on account of lower net outflows of portfolio investments and higher net inflows of direct investments during the year. These more than compensated for the reversal of other investments account to net outflows from net inflows in the previous year.
Net inflows of direct investments increased markedly to $4.2 billion in 2016 from $100 million in 2015.
The higher FDI, coupled with lower net acquisition of financial assets by residents, contributed to higher net inflows during the period.
In particular, net FDI posted a 40.7 percent growth to reach $7.9 billion, buoyed by the 68.6 percent rise in non-residents’ placements in debt instruments issued by local subsidiaries/affiliates which amounted to $5.2 billion.
Similarly, net investments in equity capital grew by 12.1 percent to $2 billion, with gross placements coming mostly from Japan, Singapore, US, and Taiwan.
These capital placements were channeled to the following sectors: financial and insurance; arts, entertainment and recreation; manufacturing; and construction.
The portfolio investment account yielded net outflows of $1.4 billion in 2016, significantly lower than $5.5 billion in the previous year.
This was brought about by the 66.5 percent decline in residents’ net acquisition of financial assets to $1.1 billion combined with the 87.6 percent decline in their net repayment of liabilities to $264 million.