BSP sees return of net investment flows into PH

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THE central bank is expecting to release on June 19 data on the Philippine balance of payments (BOP) reflecting net investment inflows into the country as global funds find their way into emerging markets with sound macroeconomic fundamentals.

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Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said portfolio investments registered net inflows in April and May, suggesting that investors have begun to distinguish emerging markets with strong fundamentals and potential such as the Philippines.

The BOP also continues to be supported by a strong current accounts surplus which comes from overseas remittances and business process outsourcing, the BSP said.

“The review/updates of the BOP projections are being finalized given the actual developments in both the domestic and external economic environment during the first five months of the year, including the shift in the direction of flows within this period,” Tetangco said in an e-mail to reporters.

For this year, the BSP is targeting a payments surplus of $3 billion, equivalent to 0.9 percent of the country’s gross domestic product. In 2013, the cumulative BOP stood at a surplus of $5.09 billion.

The latest BSP data showed that hot money flow—or the movement of portfolio investments in and out of the country—registered a net inflow of $324.75 million in April.

As a result the overall BOP position improved in April to a deficit of $19 million, compared with the $340 million deficit recorded in March and $274 million a year earlier.

A BOP surplus arises when foreign exchange inflows are greater than outflows, while a deficit is incurred when outflows exceed the inflows, causing a drop in the country’s gross international reserves.

Tetangco added that the current account — one of the major components of the BOP — is expected to remain in surplus, which will support the Philippines’ payments balance for this year.

“On the current account, we continue to expect a surplus owing to remittances and receipts from the BPO [business process outsourcing]sector that we expect will remain healthy,” Tetangco said.

The current account is the sum of the country’s net receipts from sales abroad of goods and services, overseas income and other current transfers, including remittances from overseas foreign workers.

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