Net inflow of dollars into the country grew in the first quarter as remittances remained strong and more foreign portfolio funds came in due to the favorable sentiment on the economy.
The Bangko Sentral ng Pilipinas Friday reported that the country’s balance of payments (BOP) registered a surplus of $1.54 billion from January to March, up 24 percent from $1.24 billion in the same period last year.
In March alone, the BOP stood at a surplus of $452 million, reversing the $209-million deficit in the same month last year.
The BOP is a record of the country’s commercial transactions with the rest of the world. A surplus, which indicates that the inflow of dollars and other foreign-exchange exceeded the outflow, causes a buildup in the country’s total reserves of foreign exchange or the gross international reserves (GIR).
Foreign-exchange inflow to the Philippines was driven largely by remittances from overseas Filipinos and foreign investments in peso-denominated securities like stocks and bonds.
The BSP reported on Monday that remittances in the first two months of the year amounted to $3.36 billion, up 7 percent from $3.14 billion in the same period last year. Remittances in March have yet to be reported, but officials expected the figure to likewise by higher year-on-year.
Despite the lingering weakness of the US economy and the prolonged crisis in the euro zone, remittances to the Philippines continued to grow because of the strong demand for Filipino workers in alternative labor markets like the Middle East.
Foreign portfolio investments were also robust given the improved sentiment on the Philippines.
The BSP reported last week that the net inflow of foreign “hot money” amounted to $1.09 billion in the first quarter, more than double the $464.45 million registered in the same period last year.
The rise in foreign portfolio inflow fueled the surge in the Philippine Stock Exchange index, which has broken record highs several times since the start of this year.
The inflow was likewise credited for pushing interest rates on domestic government securities to historic lows.
The positive sentiment on the Philippines followed its encouraging growth performance. Last year, the economy expanded by 6.6 percent to become one of the fastest growing in Asia. Its growth rate last year beat the government’s official target of 5 to 6 percent.
Officials expected foreign portfolio flows to continue growing throughout the rest of the year, especially after the Philippines got an investment grade from Fitch Ratings late last month.