BSP exec says FDIs to remain strong

A ranking official of the Bangko Sentral ng Pilipinas (BSP) remains positive that foreign direct investments (FDIs) will continue to boost the country's balance of payment (BOP) position.

"I think foreign direct investment will remain strong," BSP Deputy Governor Diwa Guinigundo told PNA.

This, after the central bank announced on Dec. 16 the cut in the central bank's balance of payment (BOP) assumption for 2016 to a surplus of USD500 million from USD2 billion surplus previously due to impact of weak global economy.

Last November, the BOP posted a USD1.67 billion deficit, way higher than the USD183 million deficit last October and the USD141 million deficit in November 2015.

On the other hand FDIs grew year-on-year by 25.3 percent to USD4.7 billion as of end-September this year.

The central bank's policy-making Monetary Board (MB), during its review of the central bank assumptions last November, upgraded its FDI assumption this year to USD6.7 billion from the USD6.3 billion during the review last May.

FDI is among the components of the BOP, which is the summary of a country's total transaction with the rest of the world.

"As far as FDIs are concerned I think we have more basis for saying that this will really be a good support to the balance of payment surplus," Guinigundo said.

The central bank official, on the other hand, pointed out that there are other BOP components such as foreign portfolio investment, otherwise called hot money due to the speed it comes in and out of an economy, that will affect the BOP position.

As of the week ending Dec. 2, 2016, the country posted a USD672.73 million net hot money inflow, a reversal from the USD473.41 net outflow in the week ending Dec. 4 last year.

The BSP's hot money assumption this year is a USD1.1 billion net outflow.

Last year, hot money posted a USD599.69 million net outflow due to the impact of negative external developments.

Guinigundo said hot money is a volatile item because "it is, by its very nature, very mobile."

"It's a footloose kind of capital. So if that's the case any small change in sentiment will be enough to drive them out," he said.

Another component of BOP, the capital account, where exports and imports are included, is decelerating, with the end-September level at a surplus of USD1.5 billion, lower than year-ago's USD6.2 billion surplus.

The country has been posting current account surpluses at least in the last 10 years due to inflows from Overseas Filipino Workers (OFWs) but some analysts forecast its slower growth this year as a result of weak exports and higher importation due to increasing domestic demand.

Guinigundo said it was difficult to project where the current account would be by the end of the year but cited that book-to-bill ratio, which is the proportion of orders of manufactured exports received against the amount billed for a certain period, remains on a good level.

As of last October, book-to-bill ratio stood at 0.91, lower than month-ago's 1.05 but Guinigundo said this was not worrisome and attributed it to corrections on inventory.

Source: Philippines News Agency

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