Balance of Trade and Balance of Payment New

8/8/2019 Balance of Trade and Balance of Payment New

1/27

Carreon, GlennHizon, Angelica

Ocampo, April

Razon, Ryan

Santos, Manny


2/27

What is Balance of Trade?What is Balance of Trade? The balance of trade (or net exports, sometimes symbolized asNX) is the difference

between the monetary value of exports and imports in an economy over a certainperiod of time.

It is the relationship between a nation's imports and exports

Trade surplus - a positive balance of trade and consists of exporting more than isimported

Trade deficit a negative balance of trade or, informally, a trade gap.

It forms part of the current account, which also includes other transactions such asincome from the international investment position as well as international aid. Ifthe current account is in surplus, the country's net international asset positionincreases correspondingly. Equally, a deficit decreases the net international asset

position. It is identical to the difference between a country's output and its domestic demand

(the difference between what goods a country produces and how many goods it buysfrom abroad; this does not include money re-spent on foreign stocks, nor does itfactor the concept of importing goods to produce for the domestic market).

http://en.wikipedia.org/wiki/Balance_of_trade


3/27

Factors that can affect the balance of tradeFactors that can affect the balance of trade

figures include:figures include:y Prices of goods manufactured at home (influenced by the responsiveness of

supply)

y Exchange rates regarded in 1933

yTrade agreements or barriers

y Offset agreements

y Other tax, tariff and trade measures

y Business cycle at home or abroad


4/27

Views on Economic ImpactViews on Economic ImpactModern economists are split on the economic impact of the trade deficit.

1. Trade deficit considered harmful - some economists believe that GDP andemployment can be dragged down by an over-large deficit over the long run.

Those who ignore the effects of long run trade deficits may be confusing DavidRicardo's principle of comparative advantage with Adam Smith's principle ofabsolute advantage, specifically ignoring that latter. The economist Paul CraigRoberts notes that the comparative advantage principles developed by DavidRicardo do not hold where the factors of production are internationally mobile.

2. Trade deficit is not significant - those who defend this position refer toexplanations of comparative advantage. Buyers in the receiving country send

the money back. A firm in America sends dollars for Brazilian sugarcane, andthe Brazilian receivers use the money to buy stock in an American company.This may lead to profits leaving the U.S however as Americans may forfeitcontrol. Although this is a form of capital account reinvestment, it may not be aliability on anyone in America.


5/27

What is Balance of Payments (BOP)?What is Balance of Payments (BOP)?y In economics, BOPmeasures the payments that flow between any individual

country and all other countries. It is used to summarize all internationaleconomic transactions for that country during a specific time period, usually ayear.

y It is determined by the country's exports and imports of goods, services, andfinancial capital, as well as financial transfers.

y It reflects all payments and liabilities to foreigners (debits) and all paymentsand obligations received from foreigners (credits).

y It is one of the major indicators of a country's status in international trade,

with net capital outflow.y The balance, like other accounting statements, is prepared in a single currency,

usually the domestic. Foreign assets and flows are valued at the exchange rateof the time of transaction.

http://en.wikipedia.org/wiki/Balance_of_payments


6/27

What is Balance of Payments (BOP)?What is Balance of Payments (BOP)?IMF Definition:

Balance ofPayments is a statistical statement that summarizes transactionsbetween residents and nonresidents during a period.

It comprises the current account, the capital account, and the financial account.

Together, these accounts balance in the sense that the sum of the entries isconceptually zero.

y The current account consists of the goods and services account, the primaryincome account and the secondary income account.

y The financial account records transactions that involve financial assets andliabilities and that take place between residents and nonresidents.

y Th

e capital account in t

h

e international accounts sh

ows (1) capital transfersreceivable and payable; and (2) the acquisition and disposal of non-producednonfinancial assets.

http://en.wikipedia.org/wiki/Balance_of_payments

http://www.bsp.gov.ph


7/27

What are the transactions in the CapitalWhat are the transactions in the Capital

and Financial Accounts?and Financial Accounts? The capital and financial account consists of capital transfers, direct

investments, portfolio investments and other forms of investments.

Capital transfers are also grants and donations, the intention of which is for

investment (i.e., mach

inery and equipment, buildings and structures).Th

is isin contrast with grants and donations lodged under current transfers whoseintention is for consumption (i.e. food, clothing, supplies and materials).

Direct investment refers to capital participation in a company in which theinvestor has a lasting or permanent interest. By convention, this is manifestedby ownership of at least 10 percent of the companys equity.

Portfolio investment is usually referred to as hot money since the investorsmotive is short-term as opposed to a direct investors lasting interest in acompany. A portfolio investor will buy or sell a financial instrument at anytimethere is an indication of immediate gain or loss.



8/27

What are the transactions in the CapitalWhat are the transactions in the Capital

and Financial Accounts?and Financial Accounts? Portfolio holdings may be in the form of stocks, bonds and notes, and money

market instruments, which are tradable in the market and therefore can easilybe acquired or disposed of. In case of stockholdings, a portfolio investor isdifferentiated from a direct investor ifhe owns less than ten percent of acompanys total equity.

Other forms of investments are financial derivatives, loans (trade and non-trade), holdings of currency and deposits and other investments.



9/27

Balance of payments identityBalance of payments identityThe balance of payments identity states that:

Current Account = Capital Account + Financial Account + Net Errors andOmissionsThis is a convention of double entry accounting, where all debit

entries must be booked along with

corresponding credit entries such

th

at th

enet of the Current Account will have a corresponding net of the Capital andFinancial Accounts:

where:

X = exports

M = imports

Ki = capital inflows

Ko = capital outflows


10/27

Balance of payments identityBalance of payments identityRearranging, we have:

yielding the BOP identity.y The basic principle behind the identity is that a country can onlyconsume

more than it can produce (a current account deficit) if it is suppliedcapital fromabroad(a capital account surplus).

y Mercantile thought prefers a so-called balance of payments surplus where thenet current account is in surplus or, more specifically, a positive balance of

trade.


11/27

Balance of payments identityBalance of payments identityAbalance ofpayments equilibrium is defined as a condition where the sum of

debits and credits from the current account and the capital and financialaccounts equal to zero; in other words, equilibrium is where:

This is a condition where there are no changes in Official Reserves.When there isno change in Official Reserves, the balance of payments may also be stated asfollows:

or:


12/27

International Investment Position (IPP) andInternational Investment Position (IPP) and

BOPBOP

The IIP is a companion statistic to the BOP. The BOP is a flow estimate since itrecords transactions within a given period. The International InvestmentP

osition, on th

e oth

erh

and, is a stock estimate, as it records th

e countrysforeign financial assets and foreign financial liabilities outstanding as of acertain period. The stock is the result of all the past flows plus adjustmentssuch as exchange rate movements to account for the value of the financialasset/liability as of date of reporting.



13/27

What are the uses of the BOP and IIP?What are the uses of the BOP and IIP?

The BOP and IIP are important tools for national and international policyformulation as countries have increasingly become interdependent. Policy-

makers are guided by th

e sources of imbalances as presented in th

e BOP

andIIP and therefore become better equipped in determining and implementingadjustment measures. For instance, the deficit in the current account mayhavestemmed from lower exports of goods than imports. Given this scenario,national development programs could be directed to increase competitivenessin the global market for local products and/or develop new industries that willproduce import substitutes



14/27

How often are these statistics compiled?How often are these statistics compiled?

The BOP is compiled quarterly but with a monthly breakdown. It is released tothe public electronically, i.e., via the BSPs website or in the form ofhard copies

about twelve weeks after th

e reference quarter accompanied by a press release.Meanwhile, the IIP is compiled on an annual basis nine months after thereference year.



15/27

Do other countries compile BOP and IIP?Do other countries compile BOP and IIP?

Most countries compile the BOP and IIP because of their importance tonational planning.

For international comparability, the International Monetary Fund has setguidelines on the compilation of these statistics which member countries areencouraged to comply with. Concepts and coverage are defined in the 5thEdition of the Balance ofPayments Manual (BPM5). Compilation manualsundergo periodic updating to keep abreast with the developments in themarket. As a consequence, data series are likewise subjected to revisions to

conform to th

e latest manual



16/27

Foreign Trade of the PhilippinesForeign Trade of the Philippines

(in Million $)(in Million $)Exports Imports

Total Trade

Value

Percent to

Total Trade

Average

Exchange

Rate

Percent to

Total Trade

Average

Exchange

Rate

Balance of Trade

Year Value Value Favorable +

Unfavorable -

2009

January 5,781.28 2,511.19 43.44 3,270.10 56.56 (758.91) -

2008 105,671.37 49,025.38 46.47 56,635.99 53.53 (7,610.61) -

2007 105,980.00 50,466.00 47.62 55,514.00 52.38 (5,048.00) -

2006 99,183.80 47,410.12 47.80 50.93 51,773.60 52.20 51.78 (4,363.57) -

2005 88,672.86 41,254.68 46.52 54.67 47,818.18 53.48 55.63 (6,163.50) -

2004 83,719.73 39,680.52 47.40 55.83 44,039.21 52.60 56.81 (4,358.69) -

2003 76,701.72 36,231.21 47.24 53.78 40,470.51 52.76 54.73 (4,239.30) -

2002 74,444.67 35,208.16 47.29 51.22 39,236.51 52.71 52.12 (4,028.35) -

2001 65,207.36 32,150.20 49.30 50.72 33,057.16 50.70 51.62 (906.96) -

2000 72,569.12 38,078.25 52.47 43.71 34,490.87 47.53 44.48 3,587.38 +

1999 65,779.35 35,036.89 53.26 38.78 30,742.46 46.74 39.46 4,294.43 +


17/27

Balance of Trade in the PhilippinesBalance of Trade in the Philippines

-10000

-8000

-6000

-4000

-2000

0

2000

4000

6000

1 2 3 4 5 6 7 8 9 10

Year

BOT


18/27

Philippine Top Six Imports in January : 2008Philippine Top Six Imports in January : 2008

and 2009and 2009(F.O.B. Value in Million US Dollar)(F.O.B. Value in Million US Dollar)

http://www.census.gov.ph/data/pressrelease/2009/tr0901tx.html


19/27

Imports by CountryImports by Country

http://www.census.gov.ph/data/pressrelease/2009/tr0901tx.html


20/27

Top Philippine ExportsTop Philippine ExportsTop 10 Philippine Exports for All Countries: January 2009 p

(Year-on-Year Growth in Percent)

Gainers Losers

Tuna 70.2

Ignition Wiring Set and Other Wiring

Sets Used in Vehicles, Aircrafts and

Ships

-60.3

Bananas 24.3Cathodes and Sections of

Cathodes, of Refined Copper-53.9

Other Products Manufactured from

Materials Imported on Consignment

Basis

15.6 Electronic Products -48.4

Woodcrafts and Furniture 7.5Metal Components -28.1

Gold 5.7Articles of Apparel and Clothing

Accessories-21.6

* Includes transactions that passed through Automated Export Documentation System (AEDS).

p - preliminary

r - revisedhttp://www.census.gov.ph/data/pressrelease/2009/ex0901tx.html


21/27

Philippine Top Five Exports: January 2009Philippine Top Five Exports: January 2009

and 2008and 2008 (F.O.B. Value in Million US Dollars)(F.O.B. Value in Million US Dollars)

http://www.census.gov.ph/data/pressrelease/2009/ex0901tx.html


22/27

Export by CountryExport by Country

http://www.census.gov.ph/data/pressrelease/2009/ex0901tx.html


23/27

ASEAN BALANCE OF TRADEASEAN BALANCE OF TRADE

-20000 -10000 0 10000 20000 30000 40000 50000

1

2000

2001

2002

2003

2004

2005

2006

2007

2008

Viet NamThailand

Singapore

Philippines

Myanmar

Malaysia

Lao People's Dem. Rep.

Indonesia

Cambodia

Brunei Darussalam


24/27

ASEAN BOP Trade in Goods BalanceASEAN BOP Trade in Goods Balance1999 2000 2001 2002 2003 2004 2005 2006 2007

Brunei 45.7 38.1 48.1 47.3 50.7 50.7

Cambodia -13.1 -14.8 -13.1 -13.8 -12.5 -12.8 -16.2 -14.5 -15.5

Indonesia 14.7 15.2 13.8 12.0 10.5 7.8 6.1 8.1 7.6

LAO PDR -17.4 -11.8 -10.9 -8.0 -5.9 -13.9 -11.5 -5.1 -3.5

Malaysia 28.6 22.2 19.8 18.8 23.3 22.1 24.2 23.5 20.0

Myanmar -0.2 -0.1 0.0 0.0 0.1 0.0

Philippines -7.8 -7.9 -8.8 -7.2 -7.3 -6.5 -7.9 -5.7 -5.7

Singapore 16.8 15.1 20.2 21.2 31.6 28.4 31.0 31.8 30.5

Thailand 11.4 9.5 7.4 7.2 2.6 0.9 -4.7 0.5 4.5

Vietnam 3.4 1.2 1.5 -3.0 -6.5 -8.5 -4.6 -4.6 -14.6


25/27

ASEAN BOP Trade inASEAN BOP Trade in Goods BalanceGoods Balance

-20-10

010

2030

4050

60

Brunei

Cambodia

Indonesia

LAO PDR

Malaysia

Myanmar

Philippines

Singapore

Thailand

Vietnam

2007

2006

2005

2004

2003

2002

2001

2000

1999


26/27

BOP Trade in Services BalanceBOP Trade in Services Balance1999 2000 2001 2002 2003 2004 2005 2006 2007

Brunei -10.2 -7.7 -9.1 -6.8 -5.2 -4.1 .

Cambodia 0.1 2.8 4.5 5.3 2.4 5.4 7.5 7.0 .

Indonesia -5.6 -6.3 -6.3 -5.3 -5.2 -3.4 -3.2 -2.7 -2.6

LAO PDR 5.4 7.7 7.7 . . . . . .

Malaysia -3.6 -3.0 -2.4 -1.6 -3.6 -1.7 -1.7 -1.2 .

Myanmar 0.1 0.0 0.0 0.0 0.0 0.0 . . .

Philippines

-2.1 -2.5 -3.2 -2.6 -2.5 -2.0 -1.4 0.3 .Singapore -0.4 -1.4 -4.8 -4.1 -3.9 -3.2 -2.0 -2.1 .

Thailand 0.9 -1.3 -1.4 -1.0 -1.7 -2.5 -3.9 -4.0 .

Vietnam -1.9 -1.8 -1.8 -2.1 -2.0 -1.9 -2.1 . .


27/27

BOP Trade in Services BalanceBOP Trade in Services Balance

-12 -10 -8 -6 -4 -2 0 2 4 6 8

r i

Cambodia

I

do

sia

LAO PDR

Malaysia

Mya

mar

Philippi s

Si

gapor

Thaila

d

Vi t am

2007

2006

2005

2004

2003

2002

2001

2000

1999

Date post:	10-Apr-2018
Category:	Documents
Upload:	april-ocampo
View:	218 times
Download:	0 times

Balance of Trade and Balance of Payment New

Documents