MANILA, Philippines — The balance of payments (BOP) posted a surplus for the third straight month with $80 million in June, reversing the $404-million deficit in the same month last year, amid strong inflows arising from additional government borrowings to contain the COVID-19 pandemic.
The Bangko Sentral ng Pilipinas (BSP) said the surplus in June reflected the inflows from the national government’s foreign loan proceeds that were deposited with the central bank as well as the BSP’s income from its investments abroad.
The BSP said the inflows were offset by the foreign currency withdrawals made by the national government to pay its foreign currency debt obligations.
The BOP is the difference in total values between payments into and out of the country over a particular 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 half of the year, the country booked a BOP surplus of $4.11 billion or 14.2 percent lower than the $4.79 billion surplus recorded in the same period last year.
“The current BOP surplus was supported mainly by foreign borrowings by the national government, the bulk of which were drawn in the second quarter, along with lower merchandise trade deficit,” BSP said.
Data from the Department of Finance (DOF) showed the amount of foreign borrowings, loans and grant assistance secured by the Philippine government to combat the COVID-19 pandemic has reached $7.76 billion.
Meanwhile, latest data from the Philippine Statistics Authority (PSA) showed that the country’s trade deficit narrowed by 44.7 percent to $9.84 billion from January to May compared to $17.79 billion in the same period last year.
This was after exports fell by 20.6 percent to $22.55 billion from $28.43 billion, while imports plunged by 29.9 percent to $32.4 billion from $46.22 billion.
“These positive outcomes negated fully the impact of higher net outflows of foreign portfolio investments, and lower net inflows from trade in services, personal remittances, and foreign direct investments,” the BSP said.
Personal remittances from overseas Filipino workers slipped by 2.9 percent to $10.81 billion in the first four months of the year from $10.49 billion in the same period last year, while cash remittances coursed through banks declined by three percent to $9.45 billion from $9.74 billion. The BSP now expects remittances to contract by five percent instead of growing by three percent due to travel restrictions and job displacements.
Likewise, net foreign direct investments (FDIs) inflow dropped by 32.1 percent to $1.98 billion in the first four months of the year from $2.92 billion in the same period last year.
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.
BSP said the BOP position reflects the all-time high gross international reserves (GIR) of $93.47 billion as of end-July, equivalent to 8.5 months’ worth of import of goods and payments of services as well as enough to cover 7.3 times the country’s short term external debt.