BOP deficit narrows in Dec

MANILA, Philippines - The country’s balance of payments (BOP) deficit narrowed to $214 million in December from the $1.67-billion deficit in November, latest data from the Bangko Sentral ng Pilipinas (BSP) showed.
Still, the BOP remained in a deficit due to the volatile global financial markets in the latter part of 2016, triggered by the shocking victory of US president-elect Donald Trump and ahead of his inauguration Friday.

The $214 million deficit is a reversal of the $481 million surplus a year ago and brought the 2016 BOP to a deficit of $420 million, also a marked turnaround from the $2.61 billion BOP surplus recorded in 2015.

This compares to monetary authorities’ revised projected BOP surplus for the year of $500 million or 0.2 percent of gross domestic product (GDP) from a previous forecast of $2 billion or 0.7 percent of GDP.

The BOP is a record of the country’s transactions with the rest of the world and it is closely watched by investors. A BOP surplus means that there were more dollar inflows than outflows while a BOP deficit means that there were more dollar outflows than inflows. The current account and the capital account are components of the BOP. The current account  is comprised of trade and services while the capital account records long-term and short-term inflows.

The BSP said the country’s current account surplus this year is likely to take be affected by sluggish global growth, which is expected at $800 million or lower than the earlier forecast of $3 billion.

Last year, the Philippines had a current account surplus of $7.7 billion.

BSP Deputy Governor Diwa Guinigundo has said the latter part of last year took a hit from market uncertainty which included the rate hike of the US Federal

Reserve and the softening of the global economy.

Despite the BOP deficit, the peso is seen to remain resilient this year and may still appreciate to as high as 48.50 to the dollar if better-than-expected inflows pour in, Jonathan Ravelas, chief market strategist of Banco de Oro, said in an interview yesterday.

He said the November remittance figure is a good indicator on the future trend of dollar remittances to the Philippines.

Remittancces from overseas Filipino workers (OFW) grew to $2.4 billion in November last year, aided by steady job orders overseas.

BDO expects the peso to hit 51.50 against the dollar by year-end but Ravelas said there are other factors that may push the peso stronger such as BPO revenues, national government infrastructure and strong consumer spending that would attract investors.