BOP posts higher surplus

MANILA, Philippines  — The country's balance of payments (BOP) posted a surplus for the second straight month, hitting a 16-month high of $2.43 billion in May as the national government borrowed more to soften the blow of the coronavirus disease 2019 or COVID-19 pandemic, Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor Benjamin Diokno said the surplus last May was about 2.6 times higher than the $928 million recorded in the same month last year.

This was the highest since hitting $2.7 billion in January last year.

“The BOP surplus in May 2020 reflected mainly the inflows arising from the national government’s foreign currency deposits with the BSP as well as the BSP’s foreign exchange operations and income from its investments abroad,” Diokno said.

Foreign borrowings via the issuance of global bonds as well as loans from multilateral lenders including the Asian Development Bank, World Bank, Asian Infrastructure Investment Bank, among others to fight the COVID-19 pandemic has reached $5.76 billion as of June 4.

However, the BSP chief said the inflows were partially offset by the foreign currency withdrawals that the national government made to pay for its foreign 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 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.

For the first five months of the year, Diokno said the BOP surplus amounted to $4.03 billion, or 22.3 percent smaller than the $5.19 billion surplus recorded in the same period last year.

“The current BOP surplus was supported mainly by foreign borrowings by the national government in April and May, coupled with lower merchandise trade deficit and by sustained net inflows of personal remittances from overseas Filipinos,” Diokno said.

Personal remittances from overseas Filipino workers inched up by 1.5 percent to $8.22 billion from $8.1 billion, while cash remittances coursed through banks increased by 1.4 percent to $7.4 billion from $7.3 billion. The BSP is now expecting remittances to contract by five percent instead of growing by three percent due to travel restrictions and job displacements.

Diokno added the inflows fully negated the impact of lower trade in services receipts, the net foreign portfolio investment outflows, and foreign direct investment inflows.

Data from the BSP showed the Philippines booked a net outflow of foreign portfolio investments also known as hot money or speculative funds because of its flighty nature amounted to $3.07 billion from January to May, almost 4.5 times the $685.27 million net outflow recorded in the same period last year.

Likewise, net FDI inflow fell by 14.2 percent to $1.7 billion in the first quarter of the year from $1.9 billion in the same quarter last year.

On the other hand, latest data from the Philippine Statistics Authority (PSA) showed the Philippines showed the country’s trade deficit narrowed by 43.2 percent to $8.03 billion from January to April compared to $14.14 billion in the same period last year.

This after exports fell by 16.7 percent to $18.51 billion from $22.23 billion, while imports plunged by 27 percent to $26.54 billion from $36.37 billion.

The BSP is now looking at a smaller BOP surplus of $600 million or 0.2 percent of gross domestic product (GDP) instead of $2.9 billion or 0.7 percent of GDP this year.

The country’s external payments position remained robust as the BOP surplus hit a seven-year high of $7.84 billion last year, reversing the $2.31 billion deficit recorded in 2018. This was the highest since 2012 when the Philippines booked a surplus of $9.24 billion.