BOP in surplus for 4th straight month

MANILA, Philippines — The country posted a Balance of Payments (BOP) surplus for the fourth straight month in October as more remittances flowed into the country ahead of the Christmas season, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The country’s BOP position recorded a $163-million surplus in October, reversing the $458-million deficit recorded in the same month last year.

BSP Governor Benjamin Diokno said the latest figures reflected the increase in the government’s net

 foreign currency deposits as well as the central bank’s income from its investments abroad.

Diokno said the inflows were offset by outflows representing payments made by the national government on its foreign exchange obligations.

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 in from exports, remittances from overseas Filipinos, business process outsourcing earnings and tourism receipts than what flowed out to pay for the importation of goods, services and capital.

From January to October, Diokno said the country’s BOP surplus amounted to $5.73 billion, erasing the $5.59 billion deficit recorded in the same period last year.

“The surplus may be attributed partly to personal remittance inflows from overseas Filipinos and net inflows of foreign direct investments,” the BSP said.

Personal remittances from Filipinos abroad went up by 3.6 percent to $24.64 billion from January to September compared to $23.71 billion in the same period last year, while cash remittances coursed through banks went up by 4.2 percent to $22.19 billion from $21.29 billion.

Remittances usually start to pick up during the start of the ‘ber’ months up to the Christmas holidays.

On the other hand, net FDI inflows declined by nearly 40 percent to $4.53 billion in the first eight months from $7.53 billion in the same period last year due to the global economic slowdown as well as the uncertainty brought about by the pending tax reform bill or the proposed Comprehensive Income Tax and Incentive Rationalization Act (CITIRA).

The BSP expects the Philippines to book a BOP surplus of $3.7 billion this year, reversing the $2.3 billion deficit recorded last year.

Michael Ricafort, economist at Rizal Commercial Banking Corp. (RCBC), said the higher BOP surplus has supported the strong peso exchange rate, helping lower import costs and overall inflation.

Ricafort also cited the continued inflows in remittances, business process outsourcing (BPO) revenues, foreign tourism receipts, foreign portfolio investments, and revenues from offshore gaming operators.

“Improvement in BOP surplus data also reflect increased incomes of some Philippine residents or investors and the government or BSP from abroad, thereby could help increase spending and other economic activities that lead to faster economic growth in the coming quarters,” Ricafort said.

ING Bank Manila senior economist Nicholas Mapa said the country has booked BOP surpluses in nine out of 10 months this year and financial inflows continued to help offset sustained bleeding stemming from a trade deficit.

“Although the trade gap narrowed from 2018, the current account balance is expected to remain in the red for the balance of 2019.  A sharp reversal in risk sentiment and inflation outlook have helped bolster the Philippines as a destination for investment flows, which is all the more impressive given the fact that FDIs have been contracting,” Mapa said.

He added financial market turmoil has been kept at a minimum given improved communication from the BSP despite successive rounds of easing now that inflation is under control.

For 2020, Mapa said there would be a slight change in the tides with the US Federal Reserve expected to be neutral next year and with the government gearing up for a double-headed fiscal stimulus.

“These developments could lead to a renewed widening of the trade deficit to exert pressure on the BOP, while financial flows may enjoy the same velocity in 2020 with BSP expected to cut policy rates to support the growth objective,” Mapa said.