BOP reverts to surplus after 6 months in deficit

MANILA, Philippines — The country’s balance of payments (BOP) position finally reverted to a surplus in October, ending six months of huge deficits, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data released by the central bank showed that the $711-million BOP surplus recorded last month put an end to the series of shortfalls recorded since April.

The amount reversed the four-year-high $2.34-billion deficit recorded in September, but was 37.7 percent lower than the $1.14-billion surplus booked in October last year.

“The BOP surplus in October 2022 reflected inflows arising mainly from the national government’s net foreign currency deposits with the BSP,” the central bank said in a statement.

The Philippine government successfully raised $2 billion from a three-tranche dollar bond deal in October as part of the first foray of the administration of President  Marcos  into the offshore debt market.

The proceeds of the borrowing will be used for budget financing.

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

From January to October, the Philippines posted a BOP shortfall of $7.12 billion versus the $476 million surplus recorded in the same period last year.

“Meanwhile, the current year-to-date BOP level, which is a reversal from the $476 million surplus recorded in the same period a year ago, reflected the widening trade in goods deficit as goods imports continued to surpass goods exports on the back of the persistent surge in international commodity prices and resumption in domestic economic activities,” the BSP said.

Latest data from the Philippine Statistics Authority (PSA) showed that the country’s trade deficit widened by 26.5 percent to $4.82 billion in September from $3.81 billion in the same month last year.

Exports rose by only seven percent to $7.16 billion from $6.69 billion, while imports went up by 14.1 percent to $11.98 billion from $10.5 billion.

As a result, the trade shortfall swelled by 63.2 percent to $46.65 billion in the first nine months from $28.58 billion in the same period last year.

From January to September, exports rose by only 4.7 percent to $58.31 billion from last year’s $55.69 billion, while imports surged by 24.5 percent to $104.96 billion from $84.27 billion.

The BSP said the country’s foreign exchange buffer stood at  $94 billion in end-October from $93 billion in end September, boosted by the $2 billion foreign borrowing by the national government.

According to the BSP, the buffer represents a more than adequate external liquidity buffer equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income. The GIR level is also about 6.9 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

Earlier, the Monetary Board further raised its BOP deficit forecast to $8.4 billion or two percent of gross domestic product (GDP) for this year but slightly lowered it at $2.5 billion or 0.6 percent of GDP for next year.

It also lowered its GIR projections to $99 billion for 2022 and to $100 billion for 2023.

The GIR is the sum of all foreign exchange flowing into the country and serves as buffer to ensure that it will not run out of foreign exchange that it could use in case of external shocks.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the country’s BOP position could still improve amid increasing inflows from remittances from overseas Filipino workers as well as revenues from the business process outsourcing sector.