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Foreign investment hemorrhage topull down Philippine dollar surplus
(The Manila Times Via Acquire Media NewsEdge) Aug. 4--THE continued outflow of foreign portfolio investments is likely to pull down the country's balance of payments (BOP) surplus, a Bangko Sentral ng Pilipinas (BSP) source said.
The BSP, which earlier said the country's BOP surplus would reach $2.5 billion this year, is reviewing its forecast in light of the hemorrhage of money invested in the local stock market and in other peso-denominated financial assets.
"BOP surplus is expected to be lower than the $2.5 billion because of portfolio outflows. The BSP is now reviewing the numbers," a Monetary Board official however said.
The BOP summarizes a country's economic transactions with the rest of the world and includes its external trade in goods and services, net investments both direct and portfolio, and other transfer payments. A surplus arises when the country earns more foreign exchange than it gives up, and helps to boost its dollar reserves, an increase in which lifts the local currency and tempers domestic price increases.
Last June, the BSP reduced its forecast for the BOP surplus to $2.5 billion this year from its earlier projection of $3.4 billion. The new estimated is significantly lower than the record high $8.6 billion surplus last year.
To date, net foreign portfolio investments posted an outflow of $395.38 million, compared with $3.024 billion worth of inflows in the same period last year. Total inflows reached $5.608 billion and outflows $6.003 billion so far this year.
The BSP expects net foreign portfolio investments to reach $1.1 billion this year, lower than last year's $3.5 billion due to risk aversion and high oil prices.
Foreign direct investments (FDI), which are funds brought in to establish businesses or expand existing ones, are projected to grow to $2.6 billion this year, lower than the BSP's earlier forecast of $4.2 billion.
The BSP's latest data showed that net FDI inflows declined by 43.5 percent to $820 million in the first four months this year compared with $1.451 billion in the same period last year.
Net foreign portfolio investments and FDI have been declining as a result of risk aversion following the slowdown in the US and other major economies, the global credit crunch and the record high oil and other commodity prices which dampened expectations on corporate earnings.
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Copyright (c) 2008, The Manila Times, Philippines
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