BOP surplus hits $2.2 billion in 7 months

MANILA, Philippines — The country’s balance of payments (BOP) surplus stood at $2.21 billion from January to July, reversing the year-ago deficit of $4.92 billion, despite recording shortfalls in the past four months.

The Bangko Sentral ng Pilipinas (BSP) attributed the reversal to the improvement in the balance of trade and the sustained inflows from personal remittances, net foreign borrowings by the national government, trade in services and foreign direct investments (FDI).

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 into the country from exports, overseas Filipino workers (OFW) remittances, business process outsourcing (BPO) earnings and tourism receipts than what flowed out to pay for the importation of more goods, services and capital.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit improved by 6.3 percent to $27.95 billion in the first half from $29.84 billion a year ago.

During the six-month period, imports declined by eight percent to $62.89 billion from $68.38 billion, while exports contracted by 9.3 percent to $34.94 billion from $38.54 billion.

In the same period, personal remittances from OFWs inched up by three percent to $17.59 billion from $17.09 billion, of which cash remittances coursed through banks grew by 2.9 percent to $15.79 billion from $15.35 billion.

The strong inflows were enough to offset the 21-percent drop in the entry of FDI into the country to $3.41 billion in the first four months from $4.3 billion in the same period last year.

For July alone, the Philippines booked a BOP deficit of $53 million, lower than the $1.82-billion shortfall recorded in the same month last year.

The BOP deficit in July, the BSP explained, reflected net outflows arising mainly from the national government’s payments of its foreign currency debt obligations.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the measure of the country’s cash flow statement with the rest of the world would remain in surplus due to more inflows.

“For the coming months, BOP data could still be supported by the continued growth in the country’s structural US dollar inflows, such as OFW remittances, BPO revenues, FDIs, exports, foreign tourism receipts, as well as the further narrowing of the country’s trade deficit amid the still net decline in the world prices of crude oil and other global commodities imported by the country,” Ricafort said.

He also cited the proposed $2 billion   dollar-denominated retail bonds to be offered by the national government in the third quarter, as well as the planned debut of about  $1 billion Islamic bonds or Sukuk bonds later this year.

He said the proceeds of the fund-raising activities would be added to the country’s BOP and gross international reserves (GIR).

Meanwhile, the BSP revised the country’s GIR level to $100 billion from $99.4 billion as of end-June. This represents a more than adequate external liquidity buffer equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income.

The buffer ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans.

For this year, the BSP lowered its BOP deficit projection to $1.2 billion or 0.3 percent of gross domestic product from $1.6 billion or 0.4 percent of GDP. It is expected to further narrow to $500 million or 0.1 percent of GDP in 2024.

On the other hand, the central bank sees the GIR level hitting $100 billion this year and $102 billion next year.