PHL current account to end 2011 in surplus

(Updated 8:54 p.m.) Despite a recent analysis by a financial services giant, the country’s current account balance still stands to be in a state of surplus. The Manila unit of Dutch financial services giant ING Group computed a current account surplus of only $5.1 billion this year, in contrast to the Bangko Sentral ng Pilipinas’ (BSP) announcement that the year would end with a surplus of at least $5.6 billion, indicating a capacity to export capital. The BSP had said that the size of its foreign exchange reserves or the gross international reserves recently surpassed the level of its foreign debt, offering foreign creditors room to breathe. Overall growth is still pegged between 7 percent and 8 percent this year for the gross domestic product, despite the earthquake in Japan and the turmoil in the Middle East and North Africa, Deputy BSP governor Nestor Espenilla Jr. said. The belief, he said, was that the events abroad were unlikely to be sustained events and will prove to be local rather than regional or global concerns. Joey Cuyegkeng, chief economist at ING Bank in Manila, however, noted that exports account for about a third of the country’s local output, with 15 percent coming from Japan. According to a paper released by Swiss-owned financial services firm UBS, this could be where the Philippine will feel the impact of the disaster now plaguing Japan. “The impact of the disaster in Japan through the disruption of the supply chain and a more modest remittance level could be temporary," said Cuyegkeng. While these would normally hinder overall growth, the improvements in the agricultural section and the government’s “frontloading" of fund releases could neutralize these factors, he explained. Downplaying the NSO report Cuyegkeng also downplayed the National Statistics Office (NSO) report last week that exports were at its slowest growth since November 2009. According to the economist, the sluggish growth only reflects the “normalization of economic activity after the rebound from the 2009 recession." Dollar inflows from overseas Filipino workers’ remittances and the business process outsourcing sector would “more than cover the large trade deficit," he said. “We are not too worried about the recent export performance of the Philippines," he added. These “offsetting" factors are why ING Bank Manila retained its forecast of a 5.2 percent GDP growth for the year, with the peso expected to appreciate mildly to P42:$1-P42.50:$1. “The downside risk to the forecast is the extent of success and timing of the public-private partnership programs of the government and the inflows," Cuyegkeng said. — BC/VS, GMA News