Aug/99 Trade Balance (99/10/15)

The trade surplus in August improved further to $551M from P60M the
previous month thanks to stronger exports which grew 21% to $3.2B from
$2.7B a year ago. Imports on the other hand grew slightly by 6% to
$2.7B versus $2.5B the previous year. The trade balance for the first 8
months of the year was posted at $1.3B which is a complete turnaround
from the $1.3B deficit reported a year ago. We emphasize, however, that
imports in 1998 were down while importations this year have been slowly
recovering which explains the improvement in the trade balance.
Government is targeting a $288M trade surplus by year end and we see
targets for both exports and imports being met citing that as of August,
the surplus has already reached $1.3B. Electronics continue to be the
top export and import items while the US remains our biggest trading
partner.

Sep/99 Government Budget Balance (99/10/15)

Meanwhile, govt. exceeded the budget deficit target which ran up to
P87.538B as of September against a full year revised target of P85.319B
(from P68.4B initially). The higher-than-expected deficit resulted from
weak revenue collections against higher-than-programmed expenditures.
About 18% of expenditures was used for debt payments amounting to
P78.157B. Govt. however remains optimistic that it will meet its full
year target due to an expected surplus of P2.6B in October and another
surplus of P7.4B in December as these are 堵ood revenue collection・
months. The govt. also expects to be paid P6.4B by the National Power
Corp. by end of Oct.

Aug/99 exports (99/10/4)

Exports in August rose 21% to $3.21B (vs $2.65B a year ago) following a
27% increase in electronics exports plus positive growth of clothing and
apparel. This is the second strongest growth figure recorded this year,
the first being in January when export receipts grew by 22%. Exports
to the US were slow though, at only 4% while exports to Japan were
stronger at 16%. Note that in the previous months, exports to the US
had been growing single-digit only while shipments to Japan had started
to reverse the downward trend seen last year. Government's yearend
exports target of $34B (+15.6%) is still attainable given an 8-month
export figure of $21.9B. Normally, the fourth quarter records stronger
figures as manufacturers rush shipments for the Holiday season.

Banks' asset quality weakens:(99/9/20)

The Central Bank reported that non-performing loans (NPL) of Philippine
commercial banks rose to 14.3% for the month of July from 13.1% a month
earlier. The increase was attributed to a faster growth in banks' NPL
level versus its total loans outstanding. But total loans extended
actually grew by 1% month-on-month. This indicates a growth in new
loans made by some optimistic banks to selected sectors. Also.
according to the Central Bank, actual July NPL ratio would have been
lower had most banks reported NPLs as redefined by a new circular. The
new circular reportedly states that past due loans are no longer
automatically considered NPLs if no principal and/or interest payment
has been received within 30 days. Meantime, total loan loss coverage of
banks' was reduced to 31.2% of portfolio in July (from 33.8% in June) as
some banks may have relaxed provisioning for the period.

BOP surplus in-line with target(99/9/20)

The Balance of payments posted a 6-month surplus of $2.88B or 84.5%
better than $1.56B reported in the same period last year. The stronger
BOP is attributed to a remarkable improvement in the current account.
exports growth has outpaced imports and this has resulted in a trade
surplus of $759M in the first semester. Exports for the six-month
period totaled $15.80B (+13.6%) while imports amounted to $17.89B. The
current account now totals $2.228B which already exceeded the full year
target of $1.665B. Aside from the current account, the capital account
recorded a net inflow of $2.41B thanks to net flows of medium and
long-term loans plus investments although direct investments have been
below targets. Govt is on the way to meet its yearend BOP targets of
$3.16B against $2.877B in 1998. For the remainder of the year, we
expect the current account surplus to narrow down in view of improving
imports which has slowly trimmed the trade gap.