BoP posts $752-M shortfall in Jan
The country’s balance of payments (BoP) position reverted to a deficit at the start of the year after the government shelled out money to pay its debts, according to the Bangko Sentral ng Pilipinas (BSP).
Central bank data released on Wednesday showed the gap at $752 million in January, a turnaround from December’s $4.23-billion surplus and lower than the year-earlier’s $1.35-billion shortfall.
The BoP is a record of all trade and financial transactions made between entities in one country and the rest of the world in a given period.
A deficit occurs when the country imports more goods, services and capital than it exports; a surplus, when it exports more than it imports.
In a statement, the BSP said the January deficit “reflected outflows mainly from the foreign currency withdrawals of the national government from its deposits in the BSP to pay its foreign currency debt obligations.”
The government incurred a P3.10-trillion foreign debt at end-2020.
But the outflows, the Bangko Sentral added, were partly offset by inflows from its foreign-exchange operations and income from investments abroad.
In a comment, Rizal Commercial Banking Corp. chief economist Michael Ricafort said the BoP position could return to surplus on a shrinking trade deficit; additional foreign borrowings; continued structural inflows from overseas Filipino workers’ remittances, business process outsourcing revenues and foreign investments, among others; proceeds from the private sector’s foreign fundraising activities; increase in foreign portfolio investments; and sustained pickup in foreign direct investments.
Offsetting risk factors that could lead to some reduction in the payments balance are a wider trade gap and lower prices of global bonds and gold prices, he added.
“Going forward, any sustained increase [in] BoP surpluses could fundamentally lead to new record high GIR in the coming months, thereby providing greater cushion/support/buffer for the peso exchange rate vs the US dollar, especially vs speculative attacks.”
GIR stands for gross international reserves, also known as foreign or dollar reserves.
The central bank projects the BoP position to post a $3.3-billion surplus this year on the anticipated moderation of the current account surplus.
“For 2021, the major BoP accounts are expected to show continued improvements, but could still remain below pre-pandemic levels,” it said.
Last month’s payments balance position reflected the final GIR level of $108.67 billion, smaller than the $110.12 billion as of end-December.
This level “represents an adequate external liquidity buffer, which can help cushion the domestic economy against external shocks,” the Bangko Sentral said.
The final GIR is equivalent to 11.6 months’ worth of imports of goods and payments of services and primary income. It is also about 9.4 times the country’s short-term external debt based on original maturity and five times based on residual maturity.