Economic Planning Secretary Ralph Recto said the surplus in the balance of payments—the measure of the country’s financial transactions with the rest of the world—would likely shrink to $1-$2 billion at yearend.

According to central bank data, the BoP surplus as of the first quarter was $1.7 billion.

It had reached from $8.6 billion at end-2007 as the then-improving macroeconomic fundamentals helped to attract foreign portfolio and capital investments.

Recto said the business environment this year was almost a reversal of that of last year, when the economy posted a 30-year-high growth of 7.2 percent, the peso strengthened to below 41 to the dollar, and the budget deficit was contained at P12.4 billion, the lowest since the late 1990s.

He was quick to add, however, that the economic slowdown being experienced this year was due to external factors and not domestic problems.

Recto said a lower BoP surplus would be a consequence of deleveraging, an act of converting portfolio or capital investments into cash, with the intention of holding on to more liquidity, if not to address the lack of it.

Recto also blamed the pullout of foreign portfolio investments for the weakening of the peso, which is now in the 49-per-dollar territory.

Recto stressed the need to increase spending and pump-prime the economy. He noted that the government had programmed a national budget of P1.4 trillion for next year, compared with this year’s P1.236 trillion, and said spending all of it would contribute two percentage points to the economy’s growth. Edited by INQUIRER.net