RP surplus at 10-year high of $3.77b

PHILIPPINE NEWS SERVICE — The Philippines posted balance of payments surplus of $3.77 billion in 2006, the biggest since 1996 when it reported a surplus of over $4.1 billion, the Bangko Sentral ng Pilipinas said yesterday.

The BoP surplus last year was up 56 percent from $2.41 billion in 2005 despite foreign debt pre-payments of over $2 billion. The BoP also registered a surplus of $631 million in December despite maturing obligations of some $2.4 billion.

The BoP is a record of the country’s transactions with the rest of the world including imports, exports, loans, investments and debt servicing. A surplus means the economy generated more dollars than it had to pay out.

Bangko Sentral Gov. Amando Tetangco Jr. said “the 2006 BoP surplus reflected the double-digit growth in OFW [overseas Filipino workers] remittances, narrowing trade deficit following strong merchandise exports, sustained foreign investment inflows and higher investment income of the BSP.”

Remittances from Filipino migrant workers reached $11.4 billion in the first 11 months of last year, raising the likelihood that central bank’s full-year target of $12.3 billion will be exceeded.

Foreign portfolio investments, meanwhile, yielded a net inflow of $2.6 billion in 2006, up 24 percent from the $2.1 billion reported in 2005, following a dramatic improvement in investor interest after a good fiscal performance.

Exports performed better than expected and are poised to continue their strong showing next year.

The central earlier projected that last year’s BoP would reach $2.8 billion against the International Monetary Fund’s forecast of $3.7 billion. The surplus in the BoP will enable the central bank to build up its gross international reserves, which helped support the strength of the peso. The government has improved its assumption on the foreign exchange for the year to 48 to 50 against the US dollar from the initial projection of 51 to 53.

Exports are expected to grow by 11 percent to $51.84 billion this year while imports will grow by 12 percent to $60.256 billion.

The central bank has projected this year’s BoP at a surplus of $1.6 billion.

Foreign direct investments are forecast to reach $2.199 billion, higher than the $1.895 billion projected by central bank last year.