BOP posts surplus for 6th straight month in April

MANILA, Philippines — Strong foreign exchange inflows continued to strengthen the country’s balance of payments (BOP) position, recording a surplus for six straight months with $467 million in April, according to the Bangko Sentral ng Pilipinas.

The latest figure was a complete reversal of the $270 million deficit recorded in April last year.

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 April stemmed mainly from the central bank’s foreign exchange operations and income from its investments abroad as well as the net foreign currency deposits of the national government.

The inflows were offset partially, however, by the payments made by the national government for its foreign exchange obligations.

For the first four months, the central bank said the Philippines registered a BOP surplus of $4.27 billion, a sharp turnaround from the $1.5 billion shortfall incurred from January to April last year.

“The surplus may be attributed partly to remittance inflows from overseas Filipinos and net inflows of foreign portfolio investments during the first quarter of the year, and net inflows of foreign direct investments in first two months of 2019,” the BSP said.

According to the BSP, cash remittances coursed through banks rose by only 4.2 percent to $7.3 billion in the first quarter from $7 billion in the same quarter last year, while personal remittances went up by 3.7 percent to $8.1 billion from $7.81 billion.

Net foreign direct investment inflows declined by 15.7 percent to $1.4 billion in January and February from $1.6 billion in the same period last year due to a sharp drop in equity capital placements.

On the other hand, net inflows of foreign portfolio investments or hot money reached $363.4 million in the first quarter, 52.5 percent lower than the $766.05 million recorded in the same quarter last year.

Last January, the Bureau of the Treasury tapped the offshore debt market as it issued $1.5 billion in global bonds to raise fund to plug the country’s budget shortfall.

For this year, the BSP sees a smaller BOP deficit of $3.5 billion equivalent to one percent of gross domestic product (GDP). The country’s BOP shortfall widened by 167 percent to $2.31 billion last year from $863 in 2017 due mainly from the reversal of the current account to a deficit due to the continued widening of the trade-in-goods deficit.

ING Bank Manila senior economist Nicholas Mapa said the Philippines posted another month of surplus compared to a deficit seen in the same period in 2018 with improvements seen in the financial account despite the continued presence of a current account deficit.

Mapa said the financial account likely saw a strong surplus after portfolio flows remained positive, while the government issued foreign currency debt in the first four months.

On the other hand, the economist said the current account was still in the red, but possibly slightly narrower with remittance growth from overseas Filipinos offsetting some of the deficit from the trade gap.

“We expect the Philippines to continue to see months of surplus with the external position less vulnerable in 2019 as the Philippines looks to see heavier reliance on the financial account even as the current account remains in deficit,” Mapa said.