THE PHILIPPINE economy enjoyed a steady stream of foreign cash in October, allowing the surplus in the country’s balance of payments (BOP) to breach the state’s full-year goal two months early.
Monetary authorities said some outflows should be expected heading into December as part of financial markets’ expected reaction to the US Federal Reserve’s interest rate increase. The overall BOP position is still seen staying positive.
“A knee-jerk reaction is to move out of emerging markets like the Philippines but we always say that the strong macroeconomic fundamentals can be a good factor for keeping capital in the country,” Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said.
The BSP said Tuesday that a BOP surplus of $469 million was recorded in October, more than double the $219-million surplus in September. Last month’s surplus was also significantly higher than the $24 million in October of last year.
Year-to-date, the Philippine economy’s BOP surplus stood at $2.27 billion, higher than the full-year goal of $2 billion, Guinigundo said. The current forecast is being revised as part of a twice-yearly review by economic managers.
The BOP is an accounting of all the money that comes in and out of the country during a certain period. A surplus means more money came in than went out.
BSP Governor Amando M. Tetangco Jr. said the surplus for October stemmed from dollar deposits by the national government and income from the central bank’s investments overseas.
Remittances from overseas Filipino workers (OFW) represented the biggest source of steady dollar income for the Philippine economy. By the end of this year, remittances are expected to total $25.6 billion, up 5 percent year-on-year.
Inflows during the month were offset by national government debt payments, Tetangco said.
Guinigundo said the BSP expected some short-term volatility in financial markets after the US Fed’s so-called liftoff.
Most investors expected the US Fed to raise interest rates in December. This would be the first move to tighten monetary settings in the world’s biggest economy in nearly a decade. Higher rates in the US are expected to pull away from emerging markets capital that is in constant search for yields.