By Reicelene Joy N. Ignacio
THE COUNTRY’s balance of payments (BoP) — a summary of the Philippines’ economic transactions with the rest of the world for a given period — registered a surplus for the sixth month in a row in April due to inflows from the central bank’s foreign exchange operations and income from its investments abroad that were partially offset by state foreign debt payments, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.
Latest available central bank data show that BoP turned around to a $467-million surplus in April from a $270-million deficit a year ago, taking the year-to-date tally to a $4.265-billion surfeit against a year-ago $1.497-billion gap.
“The surplus may be attributed partly to remittance inflows from overseas Filipinos and net inflows of foreign portfolio investments during the first quarter of the year, and net inflows of foreign direct investments in first two months of 2019,” the BSP said in a press release on its Web site.
“The reported BoP position reflected the final gross international reserves (GIR) level of $83.88 billion as of end-April 2019,” it noted.
“At this level, the GIR represents a more than ample liquidity buffer and is equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income.”
Such GIR level is also equivalent to five times the country’s short-term external debt based on original maturity (of up to a year) and 3.5 times based on residual maturity (short-term foreign debt falling due in up to one year plus principal payments on medium- and long-term loans of the public and private sectors falling due in the next 12 months), BSP said.
BoP marked 2018 with a $2.306-billion gap and is now projected by BSP at a $3.5-billion deficit this year.
Nicholas Antonio T. Mapa, ING Bank N.V. Manila’s senior economist, said in an e-mail to reporters: “We expect the Philippines to continue to see months of surplus with the external position less vulnerable in 2019 as the Philippines looks to see heavier reliance on the financial account even as the current account remains in deficit.”
Softening foreign demand amid simmering trade tensions between the world’s two biggest economies — the United States and China — made Philippine merchandise exports fall for a fourth month in April, fueling the trade-in-goods gap and, consequently, the BoP’s current account deficit to grow even more.
The BoP’s financial account consists of foreign direct and portfolio investments, as well as other forms of investment.
Sought for comment, Security Bank Chief Economist Robert Dan J. Roces said that “the ample international reserves serve as a good standby fund to help the economy stay afloat during an exchange crisis such as those that may be caused by the trade war or in times of national emergency.”
At the same time, Mr. Roces added, “the good numbers in terms of OF (overseas Filipino) remittances [that] form part of the current account… may not be enough to cover for the trade gap.”
“On a positive note, our high capital account means we have enough forex reserves to stabilize the peso.”
Hence, Mr. Roces said, “notwithstanding potential headwinds, as long as economic fundamentals stay robust… we are seeing a sustained surplus for the year.”
Also sought for comment, Michael L. Ricafort, economist of the Rizal Commercial Banking Corp., said in a mobile phone message that the BoP surplus “may reflect improvement in the GIR as well at 2.5 year highs, amid improvement in investment income due to gains in bond prices in the United States and developed markets” along with net foreign portfolio investment inflows of at least $200 million for the month, net foreign direct investments, growth in remittances and business process outsourcing revenues and foreign tourism receipts.
“Proceeds from foreign borrowing also added to the BoP surplus… Narrowing trend in monthly trade deficits/net imports… would also help improve BoP data in the coming months.”