By Lee C. Chipongian
The Philippines posted a balance of payments (BOP) deficit of $863 million in 2017, higher than what was reported in 2016 of $420 million, the Bangko Sentral ng Pilipinas (BSP) yesterday announced.
This is despite reporting a surplus amount of $917 million in December 2017, the highest monthly surplus of the year, aside from a similar level in April.
The end-year $863-million overall BOP shortfall is however lower than the $1.4 billion estimated by the BSP. The original central bank projection was in fact only $500 million for 2017.
In a statement, the BSP said the “higher cumulative BOP deficit for 2017 was brought about largely by the widening merchandise trade deficit for the first eleven months of the year as well as the reversal of foreign portfolio investments (based on BSP-registered transactions) to net outflows during the year from net inflows in 2016.”
“Higher prepayments made by the public and private sectors to non-resident creditors on their medium- and long-term loans for the first three quarters of the year also contributed to the larger BOP deficit, the BSP added.
As for the December BOP, the BSP said the surplus was due to inflows coming from its foreign exchange operations as well as net foreign currency deposits of the National Government (NG), and income from the BSP's investments abroad. “These were partially offset by the payments made by the NG for its maturing foreign exchange obligations during the month in review,” said the BSP.
This is the second straight year that the BSP has reported a BOP deficit. The last time a shortfall was recorded was in 2014 of $2.86 billion which interrupted nine years in a row of BOP surpluses.
In 2015, the country again reverted back to a surplus to $2.6 billion.
This year, the BSP estimates another overall BOP deficit of $1 billion.
BSP Deputy Governor Diwa C. Guinigundo has said that the BOP and current account deficits are not signs of eroding competitiveness or even an issue of low savings and investments, but rather are indicators that the Philippine growth path is sustained by higher imports.
Guinigundo noted that the BOP shortfalls are a result of increasing import bill to fund a growing economy and that there is nothing to worry about when looking at these deficit numbers, particularly since they have data and empirical studies that would prove their assessment.