BOP reverts to deficit in May

MANILA, Philippines - The country’s balance of payments (BOP) position reverted back to a deficit in May amid the continued outflow of funds and strong imports, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

BSP Deputy Governor Diwa Guinigundo said the Philippines booked a BOP deficit of $59 million in May, reversing the $241 million surplus recorded in the same period last year as well as the $917 million surplus registered in April.

Guinigundo attributed the shortfall to the foreign exchange operations of the central bank as well as the foreign exchange payments made by the national government on its foreign obligations.

He pointed out the gains from the foreign exchange deposits by the national government as well as investment income of the BSP from abroad were not enough to wipe out the deficit last month.

“These bookings must have been driven by merchandise trade as imports continue to increase on account of good growth numbers and outflows in the foreign portfolio account,” he said.

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 deficit means more money went out of the country while a surplus means otherwise.

The Philippines booked a BOP deficit of $420 million last year, a complete reversal of the $2.62 billion surplus recorded in 2015.

Last Friday, Guinigundo said monetary authorities revised the BOP projection for this year to a deficit of $500 million instead of a surplus amounting to $1 billion.

The downward revision was due to the reversal to a deficit of the current account and net outflow in the financial account.

Key considerations in the revised BOP projections include the upward revision in the global growth outlook by the International Monetary Fund to 3.4 percent instead of 3.1 percent for this year while global trade continues to show signs of recovery.

The BSP is now expecting a faster five percent instead of a two percent growth in exports while retaining the import growth at 10 percent for this year as global economic growth remained uneven with slower expansion in the euro area, India, and ASEAN while economic activity continued to pick up pace in the US, Japan, and China.

The BSP also cited the less gradual pace in the policy rate tightening by the US Federal Reserve as well as the possible impact of the policies of US President Donald Trump.

He also mentioned the growth outlook for China and the subdued outlook of capital flows for emerging markets as well as the firming of commodity prices.

The BSP also expects the current account to post a deficit of $600 million instead of a surplus of $800 million. This will be the first time in 17 years that the country would book a CA deficit with the last shortfall recorded at $282 million in 2002.