December BoP surplus biggest in more than six years

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The central bank said ‘[t]he higher cumulative BoP deficit for the period (full-year 2018) may be attributed partly to the widening merchandise trade deficit for the first 11 months of the year that was brought about by the sustained rise in imports of raw materials and intermediate goods as well as capital goods to support domestic expansion.’

By Elijah Joseph C. Tubayan, Reporter

THE PHILIPPINES’ balance of payments (BoP) posted the biggest surplus in more than six years in December, which also marked the second straight month of surfeit, the Bangko Sentral ng Pilipinas (BSP) reported on Friday, but it still ended 2018 with a wider deficit than in 2017.

BoP settled at a $2.442-billion surplus in December, the biggest monthly surfeit since the $3.182 billion recorded in July 2012.

That was 2018’s second monthly surplus since November’s $847 million, and was more than double the year-ago $917 million.

The BoP measures the country’s transactions with the rest of the world. A surplus means more money entered the Philippines than what left, while a deficit means otherwise.

“Inflows in December 2018 stemmed mainly from the BSP’s foreign exchange operations, national government’s net foreign currency deposits, and BSP’s income from its investments abroad during the month,” the central bank said in a press release accompanying the data.

It noted that the inflows were partly offset by national government payments for its foreign exchange obligations.

The full-year $2.306-billion deficit was nearly three times 2017’s $863-million gap but was less than half the $5.5-billion external payments gap expected by the BSP for 2018.

Last year’s BoP deficit was still the largest shortfall recorded since 2014’s $2.858-billion gap.

“The higher cumulative BoP deficit for the period may be attributed partly to the widening merchandise trade deficit for the first 11 months of the year that was brought about by the sustained rise in imports of raw materials and intermediate goods as well as capital goods to support domestic expansion,” the BSP said.

Latest Philippine Statistics Authority data show that the country’s trade balance settled a $37.687-billion deficit as of November last year, much bigger than the $23.408-billion shortfall during 2017’s comparable eleven months. Capital goods accounted for about a third of the 11-month imports and rose 15.5% year-on-year.

NOT A CAUSE FOR CONCERN
Sought for comment, economists said that the country’s robust macroeconomic base shows the bigger BoP deficit should not cause much worry.

“As long as economic growth is robust, the external position — however it is — is fine. As long as macroeconomic fundamentals are healthy, the Philippines general ledger of transactions are considered fine,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in an e-mail.

“The weak peso did this in and it was expected. Although I expect the peso to further weaken this 2019, the current BoP situation is not at all bothersome.”

Michael L. Ricafort, economist at the Rizal Commercial Banking Corp., said in a separate e-mail that “Philippine economic and credit fundamentals remained solid, as partly attested by the affirmation of the country’s credit ratings, as well as economic growth at six-percent levels in 2018 — among the slowest in three years partly due to higher inflation, but still among the highest/fastest in Asia/ASEAN (Association of Southeast Asia), a sign of resilience.”

Mr. Ricafort added that “[t]he wider BoP surplus in December 2018 may also be attributed to some seasonal increase in the country’s major structural foreign revenue sources, especially OFW (overseas Filipino) remittances, BPO (business process outsourcing) revenues and foreign tourism receipts, in view of Christmas-/Yuletide-related holiday spending.”