RP payments balance swings to surplus in July

MANILA, Philippines - The local economy registered a balance of payments (BOP) surplus in July, a reversal from the deficit recorded in the previous month, owing to substantial dollar receipts from remittances from overseas Filipinos and privatization of the government’s power assets. Data released Tuesday by the Bangko Sentral ng Pilipinas (BSP) showed that the country recorded a BOP surplus of $142 million in July, compared to the deficit of $248 million booked in the previous month. "The BOP surplus derives from continued strong inflows from remittances from overseas Filipinos and foreign exchange receipts from privatization of power assets," BSP Governor Amando M. Tetangco, Jr. told reporters in a mobile "text" message. The Power Sector Assets and Liabilities Management Corporation (PSALM) deposited a total of $228 million in July from the proceeds of privatization of the National Power Corporation. Remittances from Filipinos living and working abroad, which is part of the current account component of the country’s BOP, reached $8.2 billion in the first half, 17.2% higher than $7.03 billion in the same period last year. Still, the January-July tally of the country’s BOP stood at a surplus of $2.08 billion, lower than the $4.54 billion recorded in the same period last year, owing to the persistent risk aversion in the global financial market that put strain on foreign investment flows to the country. Foreign portfolio — so-called "hot money" — investments from January to July registered a net outflow of $397.2 million, a reversal from net inflow of $3.61 billion in the same period last year, as investors feared that inflation, which soared to 12.2% in July, will eat up their gains. The BOP is the summary of a country’s trade and financial transactions with the rest of the world. Its current account component measures all trade in goods and services, while the capital and financial account shows hot money flows into and out of the country. A large BOP surplus is a positive economic indicator translating to net dollar inflows that usually accompany improved sentiment toward the local investment scene. The central bank expects a $2.5-billion BOP surplus by year-end. While this is less than its initial projection of $3.4 billion and the $8.6-billion surplus last year, this will be supportive of peso appreciation by yearend, central bank officials said. — G. S. dela Peña, BusinessWorld