Remittances, BPO revenues buoy PH’s dollar earnings
The country’s dollar earnings stayed strong in July, owing to new foreign investments, remittances from migrant workers and revenue from booming industries such as business process outsourcing (BPO).
Data released by the Bangko Sentral ng Pilipinas (BSP) showed another balance-of-payments surplus in July, pushing the seven-month total above the government’s full-year forecast.
Officials were confident that the country’s strong fundamentals would keep the external payments position—referring to the entry and exit of foreign money into the economy—in the black.
In July, the country posted a BOP surplus of $354 million, lower than June’s $458 million and July 2014’s $501 million. As a result of July’s surplus, the year-to-date level reached $2.038 billion. For all of 2015, the BSP expects the Philippines to post a surplus of $2 billion.
The BOP is a consolidated accounting of the business the Philippines does with the rest of the world. A surplus means more money entered the local economy than left during the covered period, showing that the country makes more money from overseas than it needs to spend.
July’s surplus derived from the BSP’s “foreign exchange operations including investments abroad and foreign exchange deposits from the national government,” BSP Deputy Governor Diwa C. Guinigundo said. “This was made possible by the sustained inflows from remittances, BPOs, and foreign portfolio investments,” he said.
About $160 million in net outflows of foreign portfolio or “hot money” investments were recorded in July. For the January to July period, net inflows reached $478 million.
Guinigundo said inflows contributing to the total BOP surplus were partially offset by foreign debt payments made by the national government.
Consistent surpluses in the country’s BOP helps ensure the steady supply of dollars that the economy needs to deal with the rest of the world. Foreign currencies are needed to pay for imports and foreign obligations.
A strong BOP position also helps the country build up its gross international reserves (GIR), which serve as a line of defense from external shocks.
Preliminary data from the BSP showed that the country’s GIR stood at $80.4 billion as of end-July 2015, lower by $200 million than the end-June 2015 level of $80.6 billion. The end-July 2015 GIR level remains ample as it can cover 10.6 months’ worth of imports of goods and payments of services and income.