January BOP surplus highest in 6 years

MANILA, Philippines — The country’s external payments position strengthened for the third straight month with the balance of payments (BOP) surplus hitting a six-year high of $2.7 billion in January amid strong inflows.

Data released by the Bangko Sentral ng PIlipinas (BSP) Tuesday evening showed last month’s BOP surplus was a complete reversal of the $531 million deficit recorded in January last year.

This was the highest since the Philippines booked a BOP surplus of $3.18 billion in July 2012. The BOP is the difference in total values between payments into and out of the country over a period.

A surplus means more foreign exchange flowed into the country from exports, remittances from overseas Filipinos, business process outsourcing earnings and tourism receipts than what flowed out to pay for the importation of more goods, services, and capital.

The BSP said inflows in January stemmed mainly from the national government’s net foreign currency deposits, BSP’s foreign exchange operations, and income from its investments abroad.

The Bureau of the Treasury tapped the offshore debt market in January as it issued $1.5 billion global bonds as part of its foreign borrowing program to raise fund to plug the country’s budget shortfall.

The central bank said the strong inflows were partially offset by the payments made by the national government for its foreign exchange obligations in January.

 “The net inflows in foreign portfolio investments (net BSP-registered transactions based on custodian banks’ reports) contributed partly to the BOP surplus recorded in January 2019,” the central bank added.

The country’s BOP shortfall widened 167 percent to $2.31 billion last year from $863 in 2017 due mainly from the reversal of he current account to a deficit with the continued widening of the trade-in-goods deficit.

The shortfall last year was lower than the BSP’s revised full-year deficit assumption of $5.5 billion or 1.6 percent of gross domestic product (GDP).

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit swelled by 51.3 percent to a new all-time high of $41.44 billion last year from $27.38 billion in 2017.

Imports went up 13.4 percent to $108.93 billion last year from $96.09 billion in 2017, while exports slipped 1.8 percent to $67.49 billion from $68.71 billion.

The country’s trade deficit has been steadily widening over the past few years from only $3.3 billion in 2014, $12.2 billion in 2015, $26.7 billion in 2016, $27.38 billion in 2017, and $41.44 billion in 2018.

The reported BOP position reflected a gross international reserves (GIR) level of $82.49 billion in January, 4.17 percent higher than the $79.19 billion recorded in December.

At this level, the GIR represents a more than ample liquidity buffer and is equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 6.3 times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity.

The BSP uses the buffer to buy or sell dollars if it deems necessary to prevent sharp depreciation or appreciation of the peso.

For 2019, the BSP sees a smaller BOP deficit of $3.5 billion or one percent of GDP and a GIR level of $77 billion, enough to cover 6.3 month’s worth of imports of goods and payments of services.