BOP surplus drops to $2.15 B in August – BSP
At A Glance
- The Bangko Sentral ng Pilipinas (BSP) reports that as of end-August, the country's balance of payments (BOP) surplus is at $2.150 billion, lower than end-July's $2.207 billion.
- A BOP surplus position means there are more exports or inflows than imports or outflows, while a deficit position is the opposite.
- For the month of August only, the BOP is a deficit of $57 million, almost the same as July's $53 million.
- According to the BSP, the BOP incurred a deficit in August because of net outflows from the National Government's payments of its foreign currency debt.
The Bangko Sentral ng Pilipinas (BSP) reported a balance of payments (BOP) surplus of $2.150 billion as of end-August, lower than the previous month’s $2.207 billion as the government paid some of its maturing obligations.
The BOP surplus position is a stark contrast to the $5.492 billion deficit same period in 2022.
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.
For the month of August only, the BOP was in shortfall of $57 million, almost the same as July’s $53 million. The deficit is much lower compared to $572 million a year ago.
According to the BSP, the BOP incurred a deficit in August because of net outflows from the National Government’s payments of its foreign currency debt.
For the January to August period, the cumulative BOP surplus was due mainly to the improvement in the balance of trade and the sustained net inflows from personal remittances, trade in services, and foreign borrowings by the government, said the BSP.
Preliminary data from the Philippine Statistics Authority showed a trade deficit of $32.2 billion for the first seven months, lower compared to $35.8 billion same period in 2022.
As of end-July, personal remittances totaled $20.911 billion, up 2.9 percent year-on-year or from $20.236 billion. For the month of July alone, personal remittances rose 2.5 percent to $3.321 billion from $3.240 billion in the same month last year.
Meanwhile, the BSP reported that the final gross international reserves (GIR) level as of end-August stood at $99.6 billion versus $100 billion as of end-July 2023. The latest GIR level is still “more than adequate external liquidity buffer,” said the BSP.
At $99.6 billion, the GIR is equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income, and about 5.7 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.
The BSP’s Monetary Board last week revised the BOP projections for 2023 and 2024. For this year, the BSP expects a lower BOP deficit of $100 million while for next year, it 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, it 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 BSP said they expect a lower current account deficit “hinged mainly to the expected contraction in goods exports and goods imports.”
“Partly offsetting such outcome is the upward revision in services exports, bolstered by the higher growth forecast for travel receipts alongside expectations of sustained growth momentum of business process outsourcing (BPO) revenues,” it said.
As of end-June, the current account was a deficit of $8.2 billion, lower by 32.2 percent compared to $12.1 billion deficit same time in 2022.
The GIR, meanwhile, is expected to close the year at below $100 billion at $99.5 billion. This was slightly lower from the June forecast of $100 billion. Remittances, on the other hand, continue to have an expected growth rate of three percent.
In releasing its external accounts’ projections, the BSP said there are limitations to these forecasts – “given continued buildup of external challenges.”
“The BSP will continue to monitor closely emerging external sector developments and risks and how these may impact the BSP’s fulfillment of its price and financial stability objectives,” it said.