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PH narrows foreign deficit in 2nd quarter
PH narrows foreign deficit in 2nd quarter
The Bangko Sentral ng Pilipinas also reports that the country’s foreign debt remains manageable as of the previous quarter

MANILA, Philippines – The country’s balance of payments (BOP) position yielded a surplus of $330 million in the second quarter of this year, 68.3% lower than the $1 billion surplus recorded in the same quarter a year ago, the Bangko Sentral ng Pilipinas (BSP) reports.

The lower surplus was mainly due to the net outflows (or net lending of residents to the rest of the world) in the financial account.

August’s surplus cut the country’s BOP deficit in the first 8 months of 2014 to $3.43 billion.

The BOP position for the first 6 months of 2014 registered a deficit of $4.1 billion, reversing the $2.6 billion surplus recorded in the comparable period in 2013. This was due to the large net outflows in the financial account and the decline in the current account surplus.

BSP forecast a surplus of $1.1 billion for 2014.

BOP is the record of all economic transactions in a particular period between the residents of a country and the rest of the world, as well as the summation of country’s current demand and supply of the claims on foreign currencies and of foreign claims on its currency.

BOP also helps keep domestic inflation at bay.

The country’s headline inflation rate in August was at 4.9%, as indices of basic commodities posted higher annual rates, the Philippine Statistics Authority (PSA) said on September 5. Inflation, or the price increase of goods and services, was at 2.1% in August last year.

External debt still manageable

BSP also reported that the outstanding Philippine external debt approved/registered by the BSP stood at $58.1 billion as of end-June 2014, a decrease from $236 million (or 0.4%) from the $58.3 billion level as of end-March 2014.

The decline resulted mainly from repayments exceeding new borrowings by $593 million; and previous periods’ adjustments due to late reporting of transactions and audit findings (negative $262 million). 

The effects of these developments were, however, partially offset by increased investments by non-residents in Philippine debt papers ($354 million); and foreign exchange (FX) revaluation adjustments ($266 million) arising from the weakening of the US dollar, particularly against the Japanese Yen and the Philippine peso.

Private sector debt also declined to $17.1 billion from $17.6 billion due to net repayments of $388 million, mainly for bank liabilities.

Year-on-year, external liabilities rose slightly by $96 million as non-residents increased their investments in Philippine bonds and notes issued abroad by $646 million; the full impact of this was partly offset by downward foreign exchange revaluation adjustments ($315 million); previous periods’ adjustments (negative US$140 million); and net repayments ($94 million).

When measured against the gross national income (GNI), the external debt ratio or outstanding external debt improved to 17.6% from 17.9% in March 2014 and 18.3% a year ago. 

The external debt service ratio that measures foreign debt payments vis-a-vis the country’s export receipts and income transfers also improved to 6.8% in the second quarter from 7.2% in the first quarter and 8.1% a year ago.

The ratio has consistently remained at single-digit levels since 2010 indicating sustained improvement in the country’s capacity to service maturing obligations.

The country’s gross international reserves (GIR) as of June 2014 stood at $80.7 billion and covered for short-term debt of 8.4 times under the original maturity concept.

At least 83% of the country’s foreign debt will mature in more than a year, with the average maturity at 19.9 years, BSP reported.

Short-term external debt comprised the 16.5% balance of the debt stock, and were largely trade credits, inter-bank borrowings, and deposit liabilities.

Government debt will mature much later, averaging 22.1 years as against the 9.2 years for private-sector liabilities.

Multilateral institutions and bilateral creditors continued to have the largest exposures at 36.9% of total, followed by foreign holders of bonds and notes at 36.8%.  The share of foreign banks and other financial institutions stood at 17.7%, while the 8.6% balance pertained mainly to foreign suppliers/exporters.

Philippine foreign debts are denominated in US dollar (52.4%) and Japanese Yen (19.3%).

Multi-currency loans from the Asian Development Bank and the World Bank comprised 12.6% of total, while the rest of the accounts (15.7%) were denominated in 18 other currencies. –

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