BOP deficit widest in nearly 3 years

MANILA, Philippines - The Philippines booked its widest balance of payments (BOP) deficit in nearly three years last November due to the volatile global financial market brought about by the impending interest rate hike in the US as well as the shocking victory of US president-elect Donald Trump.

The Bangko Sentral ng Pilipinas (BSP) reported yesterday that the country’s BOP deficit amounted to $1.67 billion in November, almost 12 times the $141 million deficit booked in the same month last year.

Last month’s deficit was also 813.1 percent higher than the $183 million shortfall recorded in October.

The BOP shows a summary of a country’s transactions with the rest of the world. Components include trade, foreign direct and portfolio investments, and even remittances from Filipinos abroad.

A surplus means more money went into the economy while a deficit means otherwise.

The Philippines recorded lower foreign direct investments as well as foreign portfolio investment inflows over the past few months due to the much-anticipated rate increase by the US Federal Reserve as well as uncertainties about the policies of the Trump administration.

BSP Deputy Governor Diwa Guinigundo earlier said the impending interest rate hike by the US Federal Reserve continued to create a lot of uncertainty causing more volatility to the global financial markets.

Guinigundo cited the disruption in the inflow of funds into the equities and government securities markets due to the uncertainty surrounding the future of the policy of the US central bank.

As a result of the huge deficit in November, the country’s BOP position booked a $206 million deficit in the first 11 months of the year. This was a complete reversal of the $2.14 billion surplus registered from January to November last year.

Last Friday, monetary authorities slashed the projected BOP surplus this year to $500 million or 0.2 percent of gross domestic product (GDP) instead of the previous forecast of $2 billion or 0.7 percent of GDP.

Guinigundo said the lower BOP projection for this year is a result of the soft global economy as well as challenges caused by external shocks.

“We need to emphasize 2016, especially the last quarter, has been particularly challenging. There was a lot of unexpected developments,” he said earlier.

The BSP sees a higher FDI inflow of $6.7 billion instead of $6.3 billion this year due to the massive infrastructure projects under the public private partnership scheme, while foreign portfolio investments or hot money is expected to register a net outflow of $1.1 billion.

For 2017, the BSP sees the BOP surplus doubling to $1 billion as the FDI inflow is expected to hit $7 billion, while the net outflows of foreign portfolio investments is seen declining to $900 million.