Market jitters mainly due to the looming US Federal Reserve rate hike that led to the net outflow of foreign portfolio investments in September narrowed the balance of payments (BOP) surplus that month to $117 million.
Bangko Sentral ng Pilipinas (BSP) data released Wednesday showed that the surplus last September was lower than the $682-million surplus the previous month as well as the $219-million surplus recorded in the same month last year.
The surplus meant that the amount of dollars that entered the economy that month was more than the amount that left.
The BOP is a summary of all the businesses the country does with the rest of the world.
BOP data is tracked closely to ensure that the supply of dollars in the economy remains ample to allow the government as well as businesses to transact with the rest of the world.
Sources of dollar income for the country include remittances from Filipinos overseas, sales from exports of goods and services, as well as foreign investments and revenues from industries such as business process outsourcing and tourism.
The country uses the dollars it earns for the importation of goods, such as food and fuel, and also for external debt payments.
A monthly BOP surplus has been posted since March, but the September figure was the lowest so far this year.
“The surplus was driven by foreign exchange deposits by the national government and the results of the BSP’s foreign exchange operations,” Deputy Governor Diwa C. Guinigundo told reporters.
However, “September was a particularly challenging month because people thought that the US Fed would adjust monetary policy, so there was a lot of uncertainty and global financial markets proved to be more volatile,” Guinigundo said.
Hence, “even the inflow of portfolio investments was affected” that month, the BSP official said.
The latest BSP data showed that net outflow of so-called “hot money” in September hit a 32-month high amid profit-taking among foreign investors coupled with less new investments due to a deadly blast in the President’s hometown as well as external uncertainty.
Last month, the Philippines posted a $807.2-million net outflow in foreign portfolio investment, the highest since January 2014’s net outflow of $1.8 billion.
Net outflow meant more hot money left than entered the country that month.
The BSP official nonetheless expressed confidence that the BOP surplus target for this year would be achieved, as the end-September figure stood at $1.648 billion, although lower than the $1.808 billion a year ago.
“If the current account continues to be in surplus position because of the robustness in the growth of remittances, and the business process outsourcing sector continues to be strong at 15-percent [revenue growth] so far, and portfolio investments and foreign direct investments continue to provide additional growth impulses, then we should be able to see the BOP target of $2 billion for 2016 doable,” Guinigundo said.