Hot money net outflow hits $457M yr-to-date

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Reverses yr-earlier net inflow of $773.77M

FOREIGN portfolio investments in the Philippines so far this year registered a net outflow of $457.83 million as of mid-July, reversing a net inflow of $773.77 million posted in the same period a year earlier, Bangko Sentral ng Pilipinas (BSP) data released on Thursday showed.
Also called hot money, total inflows of foreign portfolio investments for the period ending July 14 reached $8.90 billion, against total outflows of $9.36 billion, according to BSP data.

These figures compare with the year-earlier total inflows of $9.20 billion and total outflows of $8.43 billion, for a net inflow of $773.77 million.

Positive external, negative internal factors

Bank of the Philippine Islands (BPI) Vice President and lead economist Emilio Neri Jr. traced the net outflow largely to external factors.

“This is still largely driven by external factors, particularly policy normalization in the developed economies given their sustained growth recovery,” he said.

Neri also said some domestic concerns, such as the Marawi City conflict and the imposition of martial law in Mindanao may have also contributed to a knee-jerk capital flow reversal.

Earlier, the International Monetary Fund (IMF) said global economic recovery was on firmer footing as improving growth in China, Europe and Japan offset downward revisions for the United States and Britain.

The Fund, in its latest update on the World Economic Outlook (WEO), said it expects the global economy to grow 3.5 percent in 2017 and 3.6 percent in 2018, maintaining its view from its April WEO.

On July 22, the Philippine Congress overwhelmingly voted to extend martial law and suspend the writ of habeas corpus in Mindanao until December 31, 2017 upon President Rodrigo Duterte’s request.

Foreign portfolio investment is also called hot money because of the ease with which the funds move in and out of a country. The investment does not necessarily create jobs, unlike foreign direct investments, which are used to build factories and buy capital equipment.

Speculative funds invested in financial assets are a component of the Philippines’ balance of payments (BOP), which summarizes the country’s economic transactions with the rest of the world over a certain period.



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