BOP deficit widens to $863 M in 2017

MANILA, Philippines — The country’s balance of payments position weakened further in 2017, recording a deficit of $863 million from a $420 million deficit in 2016, according to the Bangko Sentral ng Pilipinas.

This was, however, lower than the BSP’s earlier forecast of a $1.4 billion deficit for the whole of 2017.

“The higher cumulative BOP deficit for 2017 was brought about largely by the widening merchandise trade deficit for the first 11 months of 2017, as well as the reversal of foreign portfolio investments (based on BSP-registered transactions) to net outflows during the year from net inflows in 2016,” the BSP said.

In addition, the central bank said there were higher prepayments made by the public and private sectors to non-resident creditors on their medium- and long-term loans from January to September, which also contributed to the larger BOP deficit.

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.

According to the BSP, the full-year BOP position settled at the negative territory despite a healthy BOP surplus in December 2017.

The country’s BOP position in December registered a surplus of $917 million, a reversal from the $214 million deficit in the same month in 2016.

“Inflows for December 2017 stemmed mainly from foreign exchange operations of the BSP, net foreign currency deposits of the national government, and income from the BSP’s investments abroad. These were partially offset by the payments made by the national government for its maturing foreign exchange obligations,” the BSP said.

According to the BSP, the full-year BOP position reflected the gross international reserves level of $81.6 billion as of end-December.

The central bank said this level remains adequate as it can cover 8.3 months’ worth of imports and payments, and is equivalent to 5.8 times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity.