BOP surplus eased to $10.18B in ’11

The Philippines posted surplus of $10.18 billion in its balance of payments (BOP) in 2011 due to the sustained rise in remittances from overseas Filipinos, but the surplus was down 29 percent from $14.31 billion in 2010 given the risk aversion that led to lower net inflow of foreign portfolio investments.

This was according to the Bangko Sentral ng Pilipinas, which reported Thursday that in December alone, the country posted a $114-million deficit in the BOP, a reversal of the $1.23-billion surplus in the same month of the previous year.

“This was partly due to the risk aversion posed by the sustained crisis in the eurozone,” BSP Deputy Governor Diwa Guinigundo told reporters.

The risk aversion prompted some portfolio investors to sell their investments even in emerging markets like the Philippines. In times of uncertainties, economists said investors normally wanted to hold on to cash or perceivably very liquid assets like US treasuries.

The BOP, which indicates the net amount of inflow and outflow of foreign currencies to and from the country, is a record of the country’s commercial transactions with the rest of the world.

A surplus adds to the country’s total reserves of foreign exchange, or the gross international reserves (GIR), which currently stand at a record high of about $76 billion.

The country’s biggest sources of foreign exchange inflows were remittances and foreign portfolio investments and these were further supported by investments in the country’s business process outsourcing (BPO) sector. The inflows for 2011 exceeded the outflow, which was led by imports and debt payments.

Government officials said remittances to the Philippines, which hit more than $18 billion in the first 11 months of 2011, remained strong last year given the preference of foreign employers for Filipino workers. Officials also said the government’s move to engage in labor agreements with other countries also helped boost global demand for Filipino labor.

The significant inflow of foreign exchange last year allowed the BSP to engage in heavy dollar buying. The BSP was intervening in the market from time to time last year in a bid to curb appreciation pressures favoring the peso. Officials said the local currency, which touched the 41-to-a-dollar territory last year, could have strengthened more were it not for the market intervention by the BSP.—Michelle V. Remo