BoP at six-months high

According to the Institute for Development and Econometric Analysis, Inc. (IDEA) NewsBriefs, a regular publication produced by IDEA, the Bangko Sentral ng Pilipinas (BSP) reported that the Balance of Payments (BoP) in July reached a six-month high, reflecting the countries strong fundamentals. July BoP amounted to USD 1.099 billion, higher than the USD692 million level in June. This is also the highest level since the USD2.043 billion recorded in January. On a yearly basis, BoP from January to July amount to USD3.677 billion. This is lower than the USD4.498 billion balance recorded from the same period last year, due to the USD960 BoP deficit last February. The BSP stated that despite this, the country Is nearer the USD4.4 billion forecast for 2013.

Per IDEA, the BoP, which gives details on the country’s international transaction, is an important macroeconomic indicator. The surplus indicated that there were more inflows in the economy than outflows. This also gives cushion against external volatility, which BSP Deputy Governor Diwa Guingundo stressed after the peso and stock markets fell due to news of that the Fed’s quantitative easing is near end.

Furthermore according to the same published report, heavy rains and floods shut down the financial market for three consecutive days. Analysts said that in the absence of local information, the stock market will rely on international developments. AB Capital Securities, Inc. analysts Abbygayle Estrella pointed out that US treasury rates, which climbed to its highest level in two years, may affect the interest rate environment in the country. Lending and deposit-taking, as well as the real estate sector may be affected by changes in the interest rate. Moreover, Wall Street’s reaction to the Federal Open Market Committee (FOMC) meeting will also affect trading.

Likewise, economists reported that the country can bear debt and emphasized the need to increase spending in infrastructure and to reduce poverty. Citi economist Jun Trinidad suggested that the government reduce the government should reduce the share of foreign liabilities to the national debt. The current share of foreign debt is 35 percent. According to the said economist, this will help the government meet its medium-term fiscal consolidation program while providing funds for infrastructure and reduction of poverty, both of which can increase the economy’s growth.

Another good news is that, as per IDEA the Asian Development Bank (ADB) will raise its 2013 growth forecast for the country. According to ADB senior country economist Norio Usui, the growth will be around 6.5 percent, higher than the initial 6 percent but lower than 7.8 percent. The National Statistics Office (NSO) will release the second quarter growth next week. This will affect the ADB’s forecast, which is set to be released in October. Mr. Usui added that the country remains to be one of the growing countries in the region.

Lastly, Eastspring Investments has been appointed by the BSP to manage the equities portfolio of its provident fund. The provident fund is the sources of retirement plan benefits and annual dividends of the BSP’s employees. Eastspring did not reveal the size of the provident fund. The said company had been accredited last August 12 and will work with Union Bank of the Philippines’ Trust and Investments Services Group, which was also appointed as an equity fund manager of the provident fund last May according to the researchers of IDEA.

For comments, rejoinders and questions related to credit & collection, Mr. Ed F. Limtingco can be reached at [email protected].