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Balance of payments returns to surplus in September

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By Elijah Joseph C. Tubayan, Reporter

THE PHILIPPINES’ external payments position went back to a surplus in September after recording a deficit in four straight months, the Bangko Sentral ng Pilipinas (BSP) said late Thursday.

The Philippines’ balance of payments (BoP) position stood at $24-million surplus last month, down from September 2016’s $117 million, but was a reversal from last month’s $7-million deficit.

The BoP measures the country’s transactions with the rest of the world at a given time. A deficit means more funds left the economy compared to what went in, while a surplus shows that more money entered the Philippines.

The September surplus slightly trimmed the year-to-date deficit to $1.367 billion, from the $1.391 billion in the previous month.

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BSP Deputy Governor Diwa C. Guinigundo said in a text message that the return to a BoP surplus was driven by the central bank’s foreign exchange investment income from abroad, but was moderated due to the national government’s debt servicing requirements.

“The fundamentals are very encouraging: exports have begun to recover in the last eight months while import growth has decelerated,” Mr. Guinigundo said.

Philippine Statistics Authority (PSA) data show that merchandise exports grew 9.3% to $5.51 billion in August from a contraction a year ago, bringing the year-to-date growth to 3.5% from a 12.3% downfall in 2016. Imports on the other hand slowed to a 10.5% uptick to $7.92 billion from a 16% expansion in the same month in 2016–but still posted am 8.3% growth in the first eight months, from a 13.6% deceleration last year.

Bureau of the Treasury data meanwhile showed that debts serviced amounted to P73.17 billion in August, greater than the P27.88 billion from the previous year.

“Cash remittances continue to be robust while BPO (business process outsourcing) revenues have been reported to be resilient at around 10% growth,” added Mr. Guinigundo.

Overseas Filipino workers’ remittances reached a five-month high of $2.499 billion in August, up by 7.8% from the $2.319 billion remitted a year ago. BPO revenues totalled $11 billion during the first semester, according to BSP data.

“We hope we can keep the BoP shortfall at modest volume given the good outturn in portfolio investment in August and small overhang in September,” said Mr. Guinigundo.

Security Bank Corp. economist Angelo B. Taningco however said that despite strong portfolio and remittance inflows, the country’s balance of payments postion may go back to negative territory this month.

“For this month of October, I expect the BoP to revert to a deficit position amid a persistent trade deficit,” said Mr. Taningco in an email.

Department of Finance Undersecretary Gil S. Beltran however said a lower trade deficit would aid in the narrowing of the BoP deficit.

In the first eight months of 2017, the country’s merchandise trade deficit continued to shrink, declining to 9.2% of gross domestic product (GDP), or about $17.046 billion, compared to a 9.8% ratio, or $17.501 billion in the previous year, according to Mr. Beltran.

“The lower trade deficit will moderate the BoP deficit, possibly reverse the current account deficit and temper the peso depreciation. This will help sustain investment-led growth,” the Finance official said in a statement.

The central bank expects a $500-million BoP deficit this year, equivalent to 0.2% of GDP. If realized, this will be slightly wider than the $420-million deficit logged in 2016, which accounted for 0.1% of the economy.

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