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Economy/Fiscal Policy
August 8, 2007

Central bank may raise '07 BOP, GIR estimates
The Philippine central bank may raise its 2007 forecasts for balance of payments surplus, foreign reserves and remittances, less than two months after a similar upgrade, the deputy central bank governor said on August 8, Reuters reported.

"Given the recent developments, it might be necessary to review both the GIR (gross international reserves) and BOP (balance of payments) projections," Diwa Guinigundo said.

He later said all indicators that have impact on the balance of payments, including remittances, were up for review. But Guinigundo told reporters the country's export growth target may be revised downwards from the current 11% goal this year due to tough competition in the global electronics market.

Demand for the country's electronics products, its top export, has been sustained despite projections of a slowdown in the United States, the country's main market, Guinigundo said. Exports grew 14.6% in 2006.

"There was price erosion because of the very close competition among suppliers. While volume can be expected to be sustained because of demand, it's the price," he said.

In June, the central bank raised its estimate for this year's balance of payments surplus to between $2.4 billion to $2.9 billion from $2 billion previously.

It also said foreign reserves would hit a record $26.6 billion at the year-end, higher than a previous estimate of $26 billion. But reserves are already at $27.9 billion, as of end-July.

The central bank previously said it expected total official inflows of remittances from Filipinos overseas to reach a new peak of $14 billion this year, up 10% from last year's record. Remittance inflows in the first five months of the year totalled $5.9 billion, up 22 percent from a year earlier.

Guinigundo said remittances were likely to rise further as Filipinos abroad seek to offset the impact of a strong peso by sending more money to their families at home.

The peso is the second-best performing currency in Asia behind the Indian rupee so far this year with a gain of 8.7%.

Hefty remittances, strong foreign portfolio inflows to the stock market and rising foreign direct investments have supported growth in the balance of payments, which reached a surplus of $3.2 billion as of the first half this year to surpass the central bank's current full-year forecast.

The Southeast Asian country had a BOP surplus of $3.77 billion in 2006. It had forecast a lower surplus this year partly due to debt payments. Reuters


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