Boosted by an excess of foreign exchange buffer, the Philippines’ balance of payments (BOP) surplus surged to $5.117 billion in the first nine months of the year, based on the latest Bangko Sentral ng Pilipinas (BSP) data.
It was the highest third quarter BOP number since the fourth quarter of 2020 when the BOP posted a surplus of $16 billion.
The nine-month BOP surplus jumped to its highest level so far for this year driven by the $3.526 billion surplus for the month of September.
The end-September BOP surplus was higher than same period last year of $1.736 billion. The BOP position for September, meantime, was a reversal of the $414 million deficit in September 2023.
The BOP is a summary of the economic transactions of a country with the rest of the world for a specific period. A BOP surplus position means there are more exports or inflows than imports or outflows, while a deficit position is the opposite.
According to the BSP, the external account is significantly supported by the country’s record-level gross international reserves (GIR) of $112.706 billion as of end-September. This was the highest GIR on record since $108.794 billion in 2021.
The final GIR of $112.706 billion was higher than previously reported last Oct. 7 of $111.981 billion. The BSP releases two GIR data in a month, a preliminary and a final GIR.
The latest GIR level “represents a more than adequate external liquidity buffer” and equivalent to 8.1 months’ worth of imports of goods and payments of services and primary income. It was also equivalent to about 4.5 times of the country’s short-term external debt based on residual maturity.
The year-to-date BOP surplus of $5.117 billion, on the other hand, was likewise driven by the “narrowing trade in goods deficit alongside the continued net inflows from personal remittances, trade in services, and net foreign borrowings” by the government, as well as funds coming from foreign investors as foreign direct investments (FDI) and portfolio “hot money”.
Based on initial data from the Philippine Statistics Authority, the trade deficit for the January to August 2024 period was down to $34.3 billion versus $35.9 billion deficit same period in 2023.
Meanwhile, cash remittances totaled $22 billion as of end-August, while net FDI and hot money funds amounted to $5.3 billion end-July and $2 billion end-August, respectively.
As for the September BOP, the excess position of $3.526 billion mainly came from the government’s net foreign currency deposits with the BSP during the period. It was also supported by the central bank’s net income from its investments overseas.
The last time the BSP’s policy-making arm, the Monetary Board, revised the BOP forecasts for 2024 and 2025 was in September.
The BSP now forecasts BOP surplus to reach $2.3 billion for 2024 amid sustained funds and capital flows, global growth, increased trade and lower inflation. This was higher than its previous June estimate of $1.6 billion.
For 2025, the BOP forecast is also higher at $1.7 billion from the previous $1.5 billion.
The BSP said the improvement in the BOP is mostly influenced by positive global and domestic economic growth prospects, the country’s moderating inflation which is expected to settle within the target range of two percent to four percent, as well as the pickup in world trade activity.
Part of external sector estimates is the BSP-managed GIR. The latest projection is that GIR will end 2024 at $106 billion and $107 billion in 2025. The international reserves, technically referred to as GIR, are foreign assets of the BSP held mostly as investments in foreign-issued securities, monetary gold, and foreign exchange.