RP to meet $3.4-B forex surplus target - BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said the country’s foreign exchange surplus will meet the projected $3.4-billion total this year because of inflows into mining and business process outsourcing. As oil prices soared this year, the BSP has been reassessing the country’s balance of payments (BOP) position for 2008 but officials said there were indications that inflows could offset higher outflows due to higher import costs. The BSP is scheduled to announce its revised BOP numbers on Thursday as the Monetary Board holds its monetary policy meeting amid market expectations that the BSP would tighten its policy settings. The BOP is one of the key factors considered by the MB since the size of the surplus has an effect how far the market expected the BSP would be able to cushion the volatility of the exchange rate and therefore affect domestic liquidity and inflation. BSP deputy governor Diwa Guinigundo told reporters that although there would be shifts in the capital and financial accounts and the current accounts in the BOP, he said the surplus would be “broadly close to original projections." The country's BOP had expanded to $499 million in April from $432 million in March, higher than the $282-million surplus in April last year, because of inflows from borrowings by the national government and the sale of state-owned power assets. The April surplus brought the cumulative surplus to $ 2.134 million for the first four months of this year, also higher than the $1.7-million surplus over the same period last year. Guinigundo said however that beyond foreign borrowing and asset privatization, there were huge inflows expected to come in this year into the mining sector and business process outsourcing (BPO). “BPO investments will really kick in this year because this business is an all-weather business," Guinigundo said. “When the outlook is bad, companies outsource their operations to where it is cheaper and when the outlook is good, competition pushes them to do the same thing," he explained. The BPO industry is expecting a 70-percent surge in revenues this year as the profit crunch from the global slowdown force companies to cut down operating costs through outsourcing. Already, Guinigundo said the industry was generating $3 billion a year and BPO industry leaders were projecting a sustained growth, estimating total revenues of $10 billion annually by 2010. "The BPO is the possible mitigant to the drop in merchandize export," Guinigundo said. "The most recent prognosis continues to be bullish and the latest projected growth is a high of 70 percent growth in revenue for 2008." Guinigundo said mining investments were also largely unaffected by global worries since foreign companies operating in the country already have sunk-in costs and mineral prices have continued to be robust. Although portfolio investments have been going down, Guinigundo said inflows from overseas Filipino workers were also steadily building up the country’s reserves. With the April reserve level already at $36.7 billion, the full-year projection was expected to be easily breached and because gross inflows would be high, Guinigundo said the surplus could be supported at levels originally projected. The 2007 surplus was significantly higher at $8.6 billion, propelled mainly by remittances from overseas Filipinos and foreign portfolio investments, Remittances from OFs were particularly strong last year, averaging at over $1 billion every month as the number of deployed workers abroad also rose steadily. - GMANews.TV