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— The Editors

Improving business sentiment to lift BOP position

By Joann Villanueva

June 2, 2020, 8:37 pm

<p>RCBC chief economist Michael Ricafort</p>

RCBC chief economist Michael Ricafort

 
MANILA – The Philippines posted a lower balance of payment (BOP) surplus last March at USD448 million against the previous month and the year-ago levels, but an economist forecasts better figures in the near term on improved investors’ sentiment.
 
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort, in a reply to e-mailed questions from PNA, attributed the lower BOP surplus last March to net foreign portfolio investments outflow for the month due to market volatility after the government placed mainland Luzon in lockdown starting the middle of that month to arrest contagion of the coronavirus disease (Covid-19).
 
Another factor is that anxieties overseas as Covid-19 cases continue to rise, he said.
 
Data released by the Bangko Sentral ng Pilipinas (BSP) Tuesday showed that BOP surplus last March is lower than the USD839 million last February, and the USD627 million in the same period last year.
 
However, the surplus during the month helped lower the BOP deficit in the first quarter this year to USD68 million after a USD1.355-billion deficit was registered last January.
 
The BOP deficit of USD68 million as of end-March, however, is a big turn-around from the USD3.797-billion surplus in the same period last year.
 
BOP is the record of an economy’s total trade with the rest of the world.
 
Ricafort is optimistic for the improvement of the country’s BOP position especially since S&P Global Ratings recently affirmed its investment grade rating on the Philippines at BBB+ with stable outlook.
 
He said this move by the debt rater is “a sign of resilience; vote of confidence on the country’s economic fundamentals; despite downgrades in some countries worldwide.”
 
“Thus, BOP surplus could still improve in the coming months amid improved international investor sentiment on the Philippines,” he added.
 
Ricafort expects net foreign portfolio investments outflows to decline in the coming months and “BOP data could correspondingly improve amid recent gains in the local financial markets, such as in the bond markets/fixed income markets, stock market, and peso exchange rate market, partly due to sharp cuts in local policy interest rates and infusion of more liquidity/credit locally and in many countries worldwide, as some of the excess liquidity could find their way to the local financial markets, while others go to additional lending by banks.”
 
Last April alone, foreign portfolio investments, otherwise known as hot money due to the speed it comes in and out of an economy, posted a net outflow of USD660.38 million, lower than the USD961.08 million in the previous month but higher than the USD298.83 million during the same period last year.
 
Ricafort forecasts improvement of sentiments in the domestic financial markets as the government continues to ease the lockdowns around the country and more business establishments resume their operations.
 
“Passage of more stimulus measures and other fiscal reform measures to increase government revenues, as well as possible further monetary policy easing measures, could also help support sentiment on the local financial markets in the coming months, thereby leading to some improvements on foreign portfolio investments and BOP data, as the worst of the lockdowns could already be seen already, unless there is a second or third wave of Covid infections,” he added. (PNA)
 
 

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