The country’s current account surplus improved to $4.4 billion in the first six months of the year, reversing the $2.6 billion deficit reported same time in 2019, the Bangko Sentral ng Pilipinas (BSP) said Friday.

BSP Deputy Governor Francisco G. Dakila Jr. said the better-than-expected current account surplus in the first half of 2020 bodes well for the overall balance of payments (BOP) outlook for the year.

In May, the BSP revised the BOP projection lower from $2.9 billion surplus to $600 million surplus because of the COVID-19 pandemic impact. It also lowered the 2020 current account deficit projection from $8.4 billion previous estimate (November 2019, before the pandemic) to $1.9 billion, or now -0.5 percent of GDP from the previous forecast of -2.1 percent of GDP.

The BSP, in its regular BOP quarterly review, said the current account surplus was bigger on account of the decline in trade in goods deficit to $15.7 billion from $24.4 billion which “more than offset the lower net receipts recorded in trade in services of $5.2 billion (from $5.9 billion), primary income of $2.1 billion (from $2.5 billion) and secondary income of $12.8 billion (from $13.3 billion),” it explained.

For the second quarter, the current account’s surplus of $4.4 billion also reversed the $931 million shortfall in the same period last year mainly from the lower trade in goods deficit of $5.4 billion in the second quarter this year, from $12.1 billion in 2019. The improvement also offset the decline in net receipts of trade in services of $2.7 billion from $3.3 billion, primary income of $1 billion from $1.2 billion and secondary income of $6.1 billion from $6.7 billion, said the BSP.

The total BOP had a surplus of $4.2 billion in the second quarter, more than the $991 million of the same time in 2019.

“The BOP position rose significantly due to the reversal in the current account to a surplus, following a substantial reduction in the trade in goods deficit. The sluggish performance of both imports and exports of goods reflected the adverse impact of the COVID-19 pandemic, including the disruptions in the global demand and supply chains,” said the BSP.

The BOP is composed of the current account, the financial account and capital account.

The BSP said the financial account which is the portfolio funds or investments “reversed to net outflows mainly on account of the turnaround of portfolio investments to net outflows. This, however, was tempered by the decline in net outflows of other investments and the increase in net inflows of direct investments.”

The second quarter financial account registered net outflows of $152 million, lower than $278 million net inflows in the same quarter last year. Portfolio investments were affected by the concerns of COVID-19 pandemic.

The BSP reported that the financial account had net outflows of $3.9 billion in the first six months of the year, a turnaround from the $5.5 billion net inflows in January to June in 2019.

In the meantime, the net receipts in the capital account declined to $8 million during the quarter compared to $22 million previously. The BSP explained this as the “combined effect of net payments on gross acquisition of nonproduced nonfinancial assets of $8 million (from $1 million) and lower receipts of other capital transfers to the National Government amounting to $16 million from $20 million.”

The capital account also registered lower net receipts of $16 million in the first six months versus $47 million same time in 2019.