Current account surplus kept PHL safe from financial volatilities – Moody's

More than 10 years of consistently posting a current account surplus helped the Philippines weather the volatilities posed by economic headwinds blowing from overseas.

Plus, the consistent growth in contributions of overseas Filipinos and the expanding receipts from the services exports have given the Philippines “... a degree of resilience against external financial shocks...”  Moody’s Investors Service said in a research noted released to the media Wednesday.

As such, the banking system was practically immune to contagion the global volatilities rendered by global markets, the debt-watcher said.

“It is largely deposit-funded, aided in part by the steady flow of remittances, and exhibits a lack of dependence on external funding and low exposure to the export sector – representing a stable source of financing for government debt and minimal contingent risks to the government’s balance sheet,” the note read.

According to Investopedia, current account is the “... difference between a nation’s savings and its investment. The current account is an important indicator about an economy's health. It is defined as the sum of the balance of trade (goods and services exports less imports), net income from abroad and net current transfers. 

“A positive current account balance indicates that the nation is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower from the rest of the world. 

“A current account surplus increases a nation’s net foreign assets by the amount of the surplus, and a current account deficit decreases it by that amount. The current account and the capital account are the two main components of a nation’s balance of payments.”

Moody’s gave the Philippines its third investment grade rating with a positive outlook on Oct. 3, 2013, following the upgrades from Fitch Ratings in March 2013 and from Standard and Poor's in May.

Latest data from Bangko Sentral ng Pilipinas showed the current account surplus expanded by 34 percent to $9.4 billion last year from $7 billion a year earlier.

Remittances grew by 5.9 percent to $1.799 billion last January from $1.699 billion a year earlier.

Cash remittances hit a record-high of $22.76 billion last year, up 6.4 percent from $21.391 billion a om 2012. – VS, GMA News