BOP surplus extends to 6th straight month

MANILA, Philippines — The Philippines booked a balance of payments (BOP) surplus for the sixth consecutive month in July amid strong inflows from additional foreign borrowings by the national government to cushion the impact of the coronavirus disease.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed the $8 million surplus booked in July was 96.8 percent lower than the $248 million surplus recorded in the same month last year. This was also the smallest BOP surplus since the $5 million recorded in October 2013.

“The BOP surplus in July 2020 reflected mainly the inflows from the national government’s foreign loan proceeds that were deposited with the BSP as well as the central bank’s income from its investments abroad,” the BSP said.

However, the central bank added 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.

As a result, the country booked a BOP surplus of $4.12 billion from January to July this year or 18.2 percent lower than the $5.04 billion recorded in the same period last year.

“The current BOP surplus was supported mainly by foreign borrowings of the national government, the bulk of which were drawn in April up to July, and the lower merchandise trade deficit,” the central bank said.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit narrowed by 48.1 percent to $10.6 billion in the first half of the year from $20.42 billion in the same period last year.

Due to the global health pandemic, Philippine exports fell by 17.8 percent to $28.43 billion from $34.58 billion, while imports plunged by 29 percent to $39.03 billion from $55 billion.

The BSP said positive outcomes negated fully the impact of higher net outflows of foreign portfolio investments, and lower net inflows from foreign direct investments, trade in services, and personal remittances.

Data from the Department of Finance (DOF) showed the amount foreign borrowings, loans, and grant assistance secured by the Philippine government to combat the COVID-19 pandemic reached $8.13 billion as of early August.

On the other hand, remittances from overseas Filipino workers recovered and grew by over seven percent in June. Despite the recovery, personal remittances still declined by 4.2 percent to $15.57 billion in the first half of the year from $16.25 billion in the same period last year, while cash remittances coursed through banks retreated by 4.2 percent to $14.02 billion from $14.64 billion.

Likewise, net foreign direct investments (FDIs) inflow dropped by 25.6 percent to $2.38 billion in the first five months of the year from $3.19 billion in the same period last year despite the 46.4 percent jump in May.

On the other hand, foreign portfolio investments or hot money booked a net outflow of $3.76 billion from January to July this year, more than five times the $706.28 million net outflow recorded in the same period last year.

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 BSP said the BOP position reflects the all-time high gross international reserves (GIR) of $98.5 billion as of end July, equivalent to 8.9 months’ worth of import of goods and payments of services as well as enough to cover 7.6 times the country’s short term external debt based on original maturiry.