MANILA, Philippines — The country’s balance of payments (BOP) deficit ballooned to the widest level in 19 months to hit $1.17 billion in June amid strong dollar outflows to finance the importation of capital equipment and raw materials, according to the Bangko Sentral ng Pilipinas.
Based on BSP data, last month’s shortfall was $608 million higher than the $569 million deficit recorded in June last year.
The BOP shortfall in June was also the widest since the $1.67 billion recorded in November 2016.
“The outflows in June stemmed mainly from the foreign exchange operations of the BSP and payments made by the national government for its maturing foreign exchange obligations,” the central bank said in a statement.
The BSP said the outflows were partially offset by net foreign currency deposits of the national government and income from the central bank’s investments abroad in June.
The BOP is the difference in total values between payments into and out of a country over a period. A deficit means more foreign exchange flows out of the country to pay for the importation of more goods, services and capital than what flows in from exports.
For the first half, the country’s BOP deficit swelled to $3.26 billion from only $706 million in the same period last year due to the widening of merchandise trade deficit for the first quarter.
The BOP shortfall in the first half was more than double the revised $1.5 billion BOP deficit target set by the BSP for this year.
“The higher cumulative BOP deficit for the period may be attributed partly to the widening merchandise trade deficit for the first five months of the year that was brought about by the sustained rise in imports of raw materials and capital goods to support domestic economic expansion,” the central bank said.
According to the Philippine Statistics Authority (PSA), the country’s trade deficit rose by 3.9 percent to $11.04 billion in the first five months from $10.62 billion in the same period last year.
For May alone, the trade shortfall swelled by nearly 23 percent to a record high of $2.75 billion from $2.24 billion in the same month last year as exports rose 13.7 percent to $5.48 billion, while imports grew faster at 16.6 percent to $8.24 billion.
BSP Governor Nestor Espenilla Jr. had said the country’s external payments position remains very manageable as it has built sufficient liquidity buffers against global headwinds.
The economy needs more capital goods and raw materials to sustain its growth momentum, Espenilla said.
“Favorable external developments enabled residents to diversify asset portfolios and prepay foreign obligations. The continued stream of overseas Filipino remittances supported by a steady demand for skilled Filipinos abroad and robust receipts from the business process outsourcing sector continue to support economic growth,” he said.
The BSP said the reported BOP position is consistent with the final gross international reserve (GIR) level of $77.53 billion as of end-June, providing more than ample liquidity buffer and is equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income.