Debt ratios for Q1 remain at comfortable level

According to the Institute for Development and Econometric Analysis, Inc. (IDEA), Bangko Sentral ng Pilipinas (BSP) Chief Amando Tetangco Jr. said that the country’s external debt stood at US $60.9 billion as of the end of the first quarter of the year. This number reflects an increase of 1.5% or about US $900 million from the last quarter of 2010. The factors that led to the increase in the debt stocks were the following: first, the public and private sectors borrowed a total of US$ 3.4 billion; second, the central bank employed adjustments in the foreign exchange market due to the weakening value of the greenback against major currencies including the Philippine peso. However, these factors were partly offset by the higher investments of the Philippine residents in government notes and bonds.

Likewise, the debt-to-GDP ratio improved from 32.5% to 29.5% this year. Other ratio such as the debt– to-Gross National Income ratio also improved from 24.4% to 22.2%. The creditor profile remained unchanged. Multilateral institutions and bilateral creditors have the largest exposure of 43.6% of the debt. The currency composition of the debt stocks also remained unchanged. The greenback represents approximately half of the total, followed by the Japanese yen with 28% and the remaining is dividing among the institutions such as Asian Development Bank, World Bank, and 18 other countries.

However, according to the same published report, the national government incurred a budget deficit of Php9.601 billion for the month of May, a sharp turnaround from the Php61 billion surplus last month. Moreover, the deficit for the first five months is Php9.54 billion, well below last year’s Php162.107 billion shortfall. This means that there is ample space for the government to fast track spending in the remaining two quarters of this year. The government said that higher disbursements of funds in the month of May have caused the budget into a deficit.

Moreover, in the month of April, the merchandise imports increased at a slower pace of 20.3% year-on-year, as the demand for electronic products eased. The total value of imported goods was US$5.48 billion for the month. Meanwhile, the export goods was valued at $4.30 billion, leading to a trade deficit of $1.195 billion in the month of April. Meanwhile, the United States was the top source of imported products which was valued at $609 million.

It was also reported that net inflow of foreign investments known as hot money have tripled to US$2.2 billion from just US$700 million recorded a year ago. This indicates that the Philippine investments remains attractive. The gradual economic recovery in the West and interest differentials were some reasons why investors flock in emerging market economies. The BSP monitors the inflows of hot money as this could add inflationary pressures in the domestic economy as the circulation of money increases.

Lastly, the inflation forecast for the month of June is 4.6%-5.5% because of the increases in tuition fee, prices of school supplies, and salaries of government workers. 

For comments, rejoinders and questions on credit & collection, send email to [email protected].