Philippines incurs $415 million BOP deficit in April

MANILA, Philippines — The Philippines’ balance of payments (BOP) position reverted to a deficit in April, the biggest shortfall in 11 months, with foreign exchange flowing out of the country as the   government settled more foreign obligations.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed the country incurred a BOP deficit of $415 million in April, reversing the $2.61 billion surplus recorded in the same month last year as well as the $754 million surplus recorded in March.

The BOP shortfall was the biggest since the $1.4 billion deficit booked in May last year.

“The BOP deficit in April 2022 reflected outflows mainly from the national government’s foreign currency withdrawals from its deposits with the BSP as the national government settled its foreign currency debt obligations and paid for various expenditures,” the BSP said.

The BOP is the difference in total values between payments into and out of the country over a period. A surplus means more   dollars flowed in from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing earnings and tourism receipts than what came out to pay for the importation of more goods, services and capital.

Despite the shortfall booked last month, the country’s cumulative BOP position registered a surplus of $79 million from January to April, reversing the $231 million deficit recorded in the same period last year.

“Based on preliminary data, the cumulative BOP surplus reflected inflows that stemmed mainly from personal remittances, net foreign borrowings by the national government, and foreign direct investments,” the central bank said.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said that the latest BOP deficit is partly due to net foreign debt payments by the national government as well as the wider trade deficits in recent months.

Ricafort said the BOP deficit partly reflects some net foreign portfolio investment outflows amid increased volatility in the global financial markets.

He  said  the elevated inflation in the US, which resulted in higher interest rates, as well as Russia’s continued invasion of Ukraine translating to higher prices of oil and other commodities entail risks of global economic slowdown.

The economist of the Yuchengco-led bank said the outflows were offset by the proceeds of the national government’s Samurai bond sale, other fund-raising activities that entailed some foreign investments, and continued growth in OFW remittances, foreign direct investments and the country’s other structural   dollar inflows.

Latest data showed personal remittances from OFWs went up by 2.3 percent to $8.65 billion in the first quarter from $8.45 billion, while cash remittances coursed through banks rose by 2.4 percent to $7.77 billion from $7.59 billion.

Likewise, the net foreign direct investment inflow climbed by eight percent to $1.71 billion in the first two months  from $1.58 billion in the same period last year with the continued reopening of the economy from COVID quarantine and lockdown protocols.

The BSP is now expecting a BOP deficit of $4.3 billion instead of a smaller surplus of $700 million for the year. It is also now expecting a lower gross international reserve level of $108 billion instead of a record high of $112 billion.