BSP expects higher portfolio investments, FDIs

Monetary authorities expect foreign portfolio investments to rise more than seven times this year as the Philippine economy continued to grow, buoyed by the recent elections and the US market's recovery. "Net inflows were boosted by the Dow Jones recovery, the positive Philippines economic growth for the first quarter and the general success of the first automated elections in the Philippines amid the continuing concerns on the European debt crisis and tension between North and South Korea," the BSP stressed. The central bank said inflows of foreign portfolio investments are seen to reach $2.9 billion this year, 747 percent higher than the last year's $388.02 million. January to May net inflows of foreign portfolio investments hit $772 million, 180 percent more than 2009's $276 million, major sources of which were the US, United Kingdom, Malaysia, Singapore, and Hong Kong. Monetary authorities said stable financial markets, a strong peso and healthy corporate earnings also contributed to the steady inflow of foreign investments. It added that investments in shares of stocks listed in the Philippine Stock Exchange (PSE) grew by almost a third to $2.51 billion, making up 71 percent of total inflows for the first five months of 2010. Investments in peso-denominated government securities, meanwhile, amounted to $654 million. Peso time deposits, making up 29 percent of total inflows, were at $385 million. Higher FDI The Bangko Sentral ng Pilipinas also raised its forecast for foreign direct investment (FDI) inflows from $1.8 billion to $2 billion this year. Last year's FDI was at $1.95 billion. In the first quarter, FDI inflows grew by almost a fifth to $396 million from $334 million last year. The central bank is also confident that the target balance of payments (BOP) position and gross international reserves (GIR) this year would be achieved, BSP Deputy Governor Diwa Guinigundo said. "This would reflect the impact of the global financial crisis as well as that of the eurozone issues. At the same time it would show improvements on the trade sector both exports and imports growth recovering by a big amount," Guinigundo said. The BOP position reflects the country's transactions with the rest of the world for a certain period. It is the difference between foreign exchange inflows and outflows. The country's current BOP surplus stands at $3.7 billion, higher than the initial projections of $3.2 billion, resulting in a higher GIR of P$48 billion to $49 billion. Earlier estimates were at $47 billion to $48 billion. The GIR--the sum of all foreign exchange in local circulation, reached a new record high of $47.65 billion in May from $39.59 billion year-on-year. This could cover over nine months of imports of goods and payments of services and income, and is equivalent to almost 12 times the country’s short-term external debt based on original maturity and 5.3 times based on residual maturity falling due in the next 12 months. -- Nikka Corsino/OMG, GMANews.TV