BOP reverts to surplus after 6 months in deficit
The Philippines posted a higher balance of payments (BOP) surplus of $3.246 billion as of end-October while reversing a monthly deficit that the country has been incurring in the last six months or since April this year.
For the month of October, the BOP swung to a surplus of $1.51 billion, the first BOP in excess position since March of $1.267 billion.
From April, the BSP reported monthly deficits. The highest however, was in February of $895 million deficit which was reversed by the March surplus.
The BOP is a summary of the economic transactions of a country with the rest of the world for a specific period. It is an accounting of the economic dealings between residents and non-residents. A BOP surplus position means there are more exports or inflows than imports or outflows, while a deficit position is the opposite.
Compared to the same period last year, the current BOP position is also a significant reversal from end-October 2022’s $7.119 billion deficit. In the same month last year, it was a surplus amounting to $711 million.
The BSP said Monday, Nov. 20, that the BOP surplus in October increased mainly due to National Government (NG) deposits to the BSP during the period. The country’s BOP benefitted from these net foreign currency deposits and also from the BSP’s net foreign exchange operations and net income from its investments abroad.
As for the year-to-date BOP surplus, the central bank said that based on preliminary data, the improved balance of trade alongside the higher net inflows from personal remittances, trade in services, and foreign borrowings by the NG contributed to the higher surplus.
“Further, net inflows from foreign direct investments contributed to the surplus, albeit lower during the period,” noted the BSP.
Initial data from the Philippine Statistics Authority’s International Merchandise Trade Statistics indicated a trade deficit of $39.8 billion for the January to September 2023 period, which was lower compared to $46.7 billion deficit posted in the same period last year.
Meanwhile, BSP data showed that despite global growth uncertainty, the country’s foreign direct investment net inflows totaled $5.454 billion as of end-August, although down from from $6.261 billion same period in 2022.
The BSP also reported cash remittances of $24.494 billion as of end-September, up 2.8 percent from $23.825 billion same time last year.
The BSP said Monday that as of end-October, the final gross international reserves (GIR) tally totaled $101 billion, higher than end-September’s $98.1 billion. The central bank reports two GIR numbers in a single month, a preliminary and the final data which is reported along with the BOP.
The latest GIR level is “more than adequate external liquidity buffer equivalent” which can account for 7.5 months’ worth of imports of goods and payments of services and primary income, said the BSP. It is also about 5.8 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.
The BSP’s Monetary Board approved revisions to the BOP projections for 2023 and 2024 last month.
For this year, the BSP expects a lower BOP deficit of $100 million while for next year, the BSP has changed its outlook from a deficit to a surplus of $1 billion.
Form its previous June projections, the BSP thought the BOP will report a deficit of $1.2 billion for 2023 and a lower deficit of $500 million for next year.
Since the pandemic, the BSP revises its BOP projections quarterly versus a pre-pandemic twice-a-year review of external accounts.
According to the central bank, they revised both the 2023 and 2024 BOP projections because of the estimated narrower current account shortfall over the forecast horizon.
For this year, the BSP estimates a current account deficit of $11.1 billion from its June forecast of $15.1 billion deficit. For 2024, the BSP also expects a lower current account deficit of $10.3 billion versus the previous $15.4 billion estimate.
The GIR, meanwhile, is projected at $99.5 billion by end-2023.