MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the country’s balance of payments (BOP) surplus plunged 92.4 percent in October due to the sudden reversal of foreign capital inflows amid the risk contagion from the fragile global economic environment as well as the sovereign debt crisis in Europe.
Data released by the central bank showed that the country’s BOP surplus reached $208 million last month or $2.528 billion lower than the $2.736-billion surplus booked in October last year.
Despite the sharp decline last month, the BSP said the BOP surplus rose by 8.2 percent to $9.929 billion from January to October this year from $9.179 billion a year ago.
The BOP refers to the difference of foreign exchange inflows and outflows on a particular period and represents the country’s transactions with the rest of the world.
Originally, the BSP expected the country’s BOP position posting a surplus of $6.7 billion this year and $4.4 billion next year. Last year, the BOP posted a record surplus of $14.4 billion on the back of strong remittances of overseas Filipinos, high earnings of the business process outsourcing (BPO) sector, sustained export growth as well as surging foreign capital flows.
As early as August, the BOP target of $6.7 billion set by the BSP was breached due to strong foreign capital flows to emerging market economies including the Philippines.
However, the growth of the country’s external payments position slowed down over the last few months due to the heightened debt crisis in Europe as well as the economic uncertainty in advanced economies led by the US.
Just the other day, the BSP announced that the growth of the net inflow of foreign portfolio investments or “hot money” slowed down to 37.4 percent $3.445 billion in the first 10 months of the year from $2.508 billion in the same period last year. For the month of October alone, net inflows plunged 78.2 percent to $237.44 million from $1.088 billion in the same month last year due to the bearish sentiments of investors due to the debt crisis in Europe.
Latest data showed that the country’s gross international reserves (GIR) jumped 32.6 percent to reach $75.814 billion in end-October from $57.153 billion in end-October last year on the back of the revaluation losses of the gold holdings of the central bank as well as the payment of foreign loans by the government.
The GIR is the sum of all foreign exchange flowing into the country. The BSP originally saw the GIR hitting a new record level $63 billion and $64 billion but was later revised to range of $68 billion and $70 billion, to $74 billion to $75 billion, and finally to $75 billion to $76 billion. The country’s foreign exchange reserves surged 41 percent to a record $62.37 billion last year from $44.24 billion in 2009. - By Lawrence Agcaoili
