BOP deficit soars 4-fold in 10 months

MANILA, Philippines — Driven by the country’s strong demand for vital raw materials and capital goods from abroad, the government’s balance of payments (BOP) deficit soared to $5.59 billion from January to October, almost four times the $1.73 billion shortfall incurred in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

“This was brought about mainly by the sustained rise in imports of raw materials and intermediate goods as well as capital goods to support domestic economic expansion,” the BSP said.

For October alone, the deficit amounted to $458 million wider than the $368 million recorded in October last year, but smaller than the month ago level of $2.69 billion.

The BSP said the BOP shortfall in October stemmed mainly from payments made by the national government for its foreign obligations as well as its foreign currency withdrawals.

Likewise, the central bank said its foreign exchange operations also contributed to the BOP deficit last month.

On the other hand, the shortfall was partially offset by the BSP’s income from its investments abroad.

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 flowed out to pay for the importation of more goods, services and capital than what flowed in from exports and other sources.

Data from the Philippine Statistics Authority showed the country’s trade deficit swelled 70.5 percent to $29.91 billion from January to September compared to $17.54 billion in the same period last year.

Imports rose 16.2 percent to $80.66 billion in the first nine months from $51.83 billion in the same period last year, while exports slipped 2.1 percent to $50.75 billion from $51.83 billion.

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 has rebounded strongly back to the 52 to $1 level after reaching a 14-year low as it breached the 54 to $1 level a few months ago. It gained 14.5 centavos to close at 52.57 to $1 yesterday from Friday’s 52.715 to $1.

The BSP said the latest BOP position was consistent with the final gross international reserves level of $74.71 billion as of end-October, 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 5.7 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.