External accounts were in good shape. Merchandise exports rose
by 8.5% in US dollar terms, a turnaround from a 6.3% fall in 2011.
This recovery was driven largely by higher shipments of machinery
nd transport equipment, wood manufactures, furniture, fruits and
vegetables, processed food, and beverages. Shipments of electronics
continued to fall, though at a slower pace than in 2011. Imports grew
by 5.1% in value so that the merchandise trade deficit narrowed by 5.3%
to $14.8 billion. Trade in services produced a smaller surplus than in
the previous year. After taking into account the substantial remittance
inflows, the current account surplus rose slightly to $7.2 billion,
equivalent to 2.9% of GDP (Figure 3.28.6).
Portfolio investment inflow rose by 14.9% to $4.7 billion and foreign
direct investment by 9.8% to $2.0 billion—still low compared with other
Southeast Asian countries. The overall balance of payments recorded a
surplus of 3.7% of GDP, lifting gross international reserves to $83.8 billion
at year-end. Reserves cover 12.0 months of imports and 10.5 times short-
term external debt.
Remittances and capital inflows buoyed the peso, which appreciated
by 6.6% against the US dollar to its highest rate in 5 years. In other
financial markets, the Philippine Stock Exchange index climbed by 33%
in 2012 to a record high; capital raised through the exchange doubled
from 2011. Spreads narrowed between Philippine government bonds and
US treasuries. The forecasts assume that the government makes further progress on
reforms to improve the investment climate and that legislative elections in
May 2013 go smoothly.
Private consumption is expected to remain a key driver of growth,
underpinned by remittances and positive consumer sentiment
(Figure 3.28.7). These transfers from overseas Filipinos have accelerated
since the second half of last year. The number of deployed overseas
workers in 2012 rose by 6.7%. Domestic employment is projected to
increase this year, and election-related spending will lift consumption in
the first half of 2013.
As for private investment, a survey of businesses in February 2013
showed they were optimistic (Figure 3.28.7) and planned to increase
hiring. Imports of capital goods rose by 14% in 2012, a sign of positive
Sources: Asian Development Outlook
database; CEIC Data
Company (accessed 23 March 2013) Bangko Sentral NG Pilipinas - Economic and Financial Statistics
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