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NEWS UPDATES Asean Affairs                       20  August 2011

Philippines FX surplus surges

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The Philippines’ foreign exchange surplus surged by sevenfold last month amid inflows from the central bank’s investments, coupled with strong remittances from overseas Filipino workers.

Data from the Bangko Sentral ng Pilipinas showed that the country’s balance of payments (BOP) registered a surplus of US$1.270 billion in July, up 724 percent from the $154 million in the same month last year.

BSP Deputy Gov. Diwa Guinigundo said the uptick was brought about by the resilience of remittances, which grew seven percent to $1.7 billion in June compared with $1.623 billion in the same month last year.

“We continue to show strong exports, remittances, revenues from business process outsourcing and tourism receipts. At the same time, we continue to get foreign direct and foreign portfolio investments in a strong way,” Guinigundo said.

He said inflows from the foreign exchange operations of the BSP, income from investments abroad and foreign currency deposits of the government contributed to the growth in the BOP surplus.

The cumulative BOP surplus jumped 82.9 percent to reach $6.286 billion at end-July from the $3.438 billion in the same seven-month period last year.

“Barring any unforeseen event, we expect the BOP to be resilient and the GIR to continue to expand. The reserve buildup is a consequence of a favorable BOP development. The dynamics in external sector are better than our projections early in the year. We are almost there and it is only July,” Guinigundo said.

The country’s BOP position was projected to register a surplus of $6.7 billion this year and $4.5 billion in 2012 amid expectations of a higher trade deficit.

The BOP is a summary of the country’s economic transactions—both in the current as well as in the capital and financial accounts—with the rest of the world.

Current account transactions cover trade in goods, services, income and transfers.

Exports are projected to grow by nine to 10 percent this year and by 12 percent in 2012, while imports are forecast to increase 17 to 18 percent in 2011 and 18 percent next year.

The other forms of investments under the BOP are loans and holdings of currency and deposits.

The BSP also forecast the country’s gross international reserves to reach $70 billion this year and $75 billion in 2012.

During the first half of the year, foreign exchange reserves grew by 42 percent to $69 billion compared with last year’s $48.7 billion. Month-on-month, the GIR grew by 0.21 percent from $68.85 billion in May.

The BSP holds international reserves for the foreign exchange requirements of the country in case the domestic commercial banks’ supply of the greenback falls short of demand.

The foreign assets that the BSP holds are mostly in the form of investments in foreign-issued securities, monetary gold and foreign exchange. An ample GIR level helps prop up the peso and keeps domestic inflation at bay.

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It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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