Remittances, ‘hot money’ up

MANILA, Philippines—Remittances from Filipinos based in the United States and Europe, as well as foreign portfolio investments, grew at a rapid pace early in the year, raising hopes that foreign currency inflows into the country will remain strong in 2011 despite negative developments abroad.

The Bangko Sentral ng Pilipinas reported Thursday that the net inflow of foreign portfolio investments reached $534 million in February, rising by nearly three times from the $138.58 million recorded in the same month last year.

This brought the net inflow of “hot money” in the first two months to $754.5 million, up by 144 percent from the level recorded in the same period last year.

BSP officials said the significant increase in foreign portfolio investments as of February improved the country’s ability to meet external liabilities.

Foreign portfolio investments mostly come in the form of placements in the country’s stock market and bond purchases.

Officials said the growth in “hot money” inflows proved the improving confidence of foreign portfolio investors in the Philippine economy, at least for the short term.

Meanwhile, the BSP also reported that remittances from Filipinos based in the United States and Europe grew at a faster-than-anticipated pace in January.

Remittances are a closely watched economic indicator as these largely fuel consumption of Filipino households.

Data from the BSP showed that remittances from US-based Filipinos reached $526.16 million, up by 8.5 percent year on year.

The amount accounted for 35 percent of the total remittances of $1.48 billion for the month.

Meanwhile, remittances from Filipinos based in Europe reached $276 million in January, rising by 9.3 percent year on year.

Economic managers are optimistic that remittances will continue to rise this year despite the ill effects of the political turmoil in the Middle East and the twin disasters in Japan.