BOP reverts to deficit, hits 5-year high in Sept 2018

MANILA, Philippines — The country’s balance of payments (BOP) position reverted to a deficit as the shortfall reached a near five-year high of $2.69 billion in September, reversing the $1.27 billion surplus in August due to strong outflows.

The Bangko Sentral ng Pilipinas (BSP) said last month’s BOP deficit was also a reversal of the $24 million surplus booked in September last year.

In a statement, the central bank said the shortfall last month stemmed mainly from foreign exchange operations of the BSP and payments made by the national government for its foreign exchange obligations.

The outflows were partially offset by the net foreign currency deposits of the national government, the BSP said.

BOP is the difference in total values between payments into and out of a country over a period.

A deficit, on the other hand,  means more foreign exchange flowed out to pay for the importation of more goods, services and capital than what flowed in from exports and other sources.

For the first nine months to September, the Philippines recorded a BOP deficit of $5.14 billion or almost three times the $1.73 billion shortfall booked in the same period last year.

 “The higher deficit may be attributed partly to the widening merchandise trade deficit for the first eight months of the year,” the BSP said.

The peso has been weakening amid the strong demand for US dollars to finance the sustained rise in imports of raw materials and intermediate goods as well as capital goods to support domestic economic expansion.

The local currency is the third worst performing currency in the region after the Indian rupee and Indonesian rupee. It has depreciated by more than eight percent year on year and even pierced the 54 to $1 level to hit its weakest level in almost 14 years.

The Philippines has booked BOP deficits every month this year except for the $1.27 billion surplus in August after the national government raised $1.4 billion via the issuance of Samurai bonds.

As early as May, the revised $1.5 billion BOP deficit target set by the BSP for the year was breached.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit swelled 64.7 percent to $26 billion from January to August.

 Imports in the first eight months grew 15 percent to $70.91 billion while exports fell 8.1 percent to $44.91 billion.

The reported BOP position is consistent with the final gross international reserves (GIR) level of $74.94 billion as of the end of September, equivalent to 6.8 months’ worth of imports of goods and payments of services and primary income.

The foreign exchange cover is also equivalent to 5.9 times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity.