February BOP surplus surges to $985M
Strong investment flows in February drove an increase in the economy’s dollar income to its highest level in nearly a year and a half, central bank data released this week showed.
The surplus in the country’s balance-of-payments (BOP) helped the government shore up its dollar reserves, giving the economy a more comfortable buffer from possible external crises that may affect financial stability.
In February, the country posted a BOP surplus of $985 million, the highest since July of 2013. This brought the year-to-date BOP position to a surplus of $1.12 billion. In contrast, a deficit of $4.13 billion was recorded in the same two-month period last year.
The BOP is a summary of all the business dealings between the Philippines and the rest of the world. Surpluses indicate that more money was made than spent, while deficits mean the opposite.
February’s surplus marks the third-consecutive positive monthly performance for the Philippines.
In February, foreign investments in local stocks, bonds and other securities posted a net inflow of $1.19 billion or double the previous month’s $591.17 million. Foreign portfolio investments in February were the highest since the $1.27 billion in net inflows in January 2013.
The level of foreign portfolio investments, often referred to as “hot money” due to their fickle nature, is used as a barometer for investors’ perception of the state of the economy.
Massive outflows were recorded early last year amid jitters over the US Federal Reserve’s plan to start cutting its monetary stimulus for the American economy.
Apart from investments, remittances and BPO and tourism revenues, export sales and proceeds of foreign obligations are also counted as inflows in the BOP.
Meanwhile, the country spends on dollars it earns on the importation of goods such as food and fuel and foreign debt payments. Divestments made by foreign investors are also counted as outflows.
For all of 2015, the BSP expects the economy to end the year with a BOP surplus of $1 billion.
Meanwhile, the BSP reported that at the end of 2014 the country posted a record-high current account of $12.6 billion from $11.4 billion the year before. This was mainly a result of cheaper fu el, which resulted in a drop in the country’s import bill and a narrowed trade deficit.
The current account is a component of the BOP that considers only recurring forms of income and expenses. This includes trade revenues and spending, remittances and earnings from industries such as outsourcing and tourism.
As fuel prices dropped and export revenues held steady, the country’s trade deficit narrowed to $15.8 billion from $17.6 billion the year before.
