BoP swings to $80-M surplus in June

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The Philippines’ overall balance of payments (BOP) position posted a surplus of$80 million in June. — PAUL YEUNG/BLOOMBERG

By Luz Wendy T. Noble, Reporter

THE balance of payments (BoP) registered an $80-million surplus in June — the slimmest in five months, reflecting the proceeds from foreign loans obtained by the government to fund its coronavirus response, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

Latest available central bank data showed that BoP — a summary of the Philippines’ economic transactions with the rest of the world for a given period — swung to a $80-million surplus in June, a reversal from the $404-million deficit during the same month a year ago.

June’s BoP surplus was also much slimmer than the $2.431-billion surplus logged in May.

“The BOP surplus in June 2020 reflected mainly the inflows from the National Government’s (NG) foreign loan proceeds that were deposited with the BSP as well as the BSP’s income from its investments abroad. These inflows were offset, however, by the foreign currency withdrawals made by the NG to pay its foreign currency debt obligations during the month in review,” the BSP said in a statement.

For the first semester, the cumulative BoP surplus stood at $4.11 billion, lower than the $4.79-billion surplus logged a year ago.

The BSP attributed the BoP surplus to the higher foreign borrowings made by the national government, the majority of which were drawn in the second quarter, as well as the lower merchandise trade deficit.

“These positive outcomes negated fully the impact of higher net outflows of foreign portfolio investments, and lower net inflows from trade in services, personal remittances, and foreign direct investments,” the central bank said.

The BSP expects the overall BoP position to post a surplus of $600 million by end-2020, representing 0.2% of the country’s gross domestic product.

Economists said the June BoP position reflects the impact of the pandemic.

“It is intuitive to surmise that the BoP surplus in June reflected not only the foreign investments of government and BSP but also significant inflows of funds from foreign borrowings by the government to contain COVID-19 (coronavirus disease 2019),” John Paolo R. Rivera, an economist at the Asian Institute of Management, said in a text message.

The country’s ample reserves will be its buffer against weaker inflows from trade, according to Ateneo de Manila University economist Alvin P. Ang.

“A large positive BoP at this time is showing a weak economy due to weak trade but it does help to have more than enough foreign exchange buffer for short-term payables,” Mr. Ang said in a text message.

The current BoP position shows a record-high final gross international reserves level of $93.47 billion as of end-June. This is higher by a tenth from its level a year ago and by $18 million from the May level.

“It is about 7.3 times the country’s short-term external debt based on original maturity and 4.8 times based on residual maturity,” the BSP said.

The dollar reserves as of end-June is also equivalent to 8.5 months’ worth of imports of goods and payments of services and primary income.