Balance of payments notes

Balance of payments notes -...

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Balance of Payments June 2011 Department of Economic Statistics 1 1. What is the Balance of Payments (BOP)? The Balance of Payments (BOP) is a summary of the economic transactions of a country with the rest of the world, for a specific time period. It serves as an accounting statement on the economic dealings between residents of the country and non-residents. 2. Who are the residents of the country? Nationality is not a basis for determining an individual’s country of residence. A person is considered a resident of a country when he has stayed or intends to stay in that country for one year or more. Thus, an Overseas Filipino (OF) can remain a resident of the Philippines or can become a non-resident depending on the length of the job contract abroad. Similarly, a business enterprise is considered a resident of a country if it engages, for a year or more, in the production of goods or services in a significant scale in that country. Branches and subsidiaries of foreign companies are treated as residents of countries where they operate their business. However, a liaison or a representative office of a foreign company, regardless of the length of its stay, does not qualify as a resident enterprise. Its presence in a country is not for operating a business but only for providing auxiliary services to the parent company. It remains as an integral part of the foreign parent’s operations and thus, is treated as a non-resident where it is located. Government instrumentalities like embassies, consulates, military establishments stationed abroad remain as residents of the country they represent. 3. What economic transactions are engaged in by residents of a country with non-residents? Economic transactions are grouped into two major categories: (1) current account, and (2) capital and financial account. 4. What are current account transactions? The current account covers trade in goods, services, income, and current transfers. Trade in goods—exports and imports—is the bulk of the current account. Electronics are the country’s major exports. Consequently, raw material inputs to electronics exports make up a sizable portion of imports. Trade in services is another component of the current account. Travel receipts dominate the country’s exports of services while transportation ranks as the top service imports, largely on account of payments to foreign carriers for freight of the country’s imported goods. Other service transactions with the rest of the world include communication, insurance, computer and information, business and professional services.
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Balance of Payments June 2011 Department of Economic Statistics 2 The income sub-account records as receipts a portion of OF earnings, as well as the profit of Philippine investments abroad. 1
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