BoP in surplus for 4th month in a row

THE PHILIPPINES got more dollars than it spent to pay off foreign obligations in October, turning around from a year-ago deficit and marking the fourth straight month of balance of payments (BoP) surplus, according to data the Bangko Sentral ng Pilipinas (BSP) reported on Tuesday.

BSP data showed October with a $163-million BoP surplus that was a turnaround from a $458-million year-ago deficit. The BoP summarizes the country’s economic transactions with the rest of the world within a given period.

The central bank said in a press release that October’s dollar inflows “reflected the increase in the national government’s (NG) net foreign currency deposits and BSP’s income from its investments abroad.”

“These inflows were offset… by outflows representing payments made by the NG on its foreign exchange obligations during the month in review.”

That brought year-to-date BoP to a $5.73-billion surplus that was a turnaround from the $5.594-billion gap in the 10 months to October last year. The central bank attributed the year-to-date surplus “partly to personal remittance inflows from overseas Filipinos and net inflows of foreign direct investments.”

Latest available data from the central bank show cash sent home by overseas Filipino workers (OFWs) rose by 4.2% to P22.2 billion as of September from P21.3 billion in last year’s comparative nine months, while the eight months to August saw foreign direct investments with a net inflow of $4.535 billion that was nevertheless 39.7% smaller than the year-ago $7.526 billion.

The central bank noted that the year-to-date BoP surplus “reflects the final gross international reserves (GIR) level of $85.83 billion as of end-October.” Such GIR reflected “a more-than-ample” buffer to external financial shocks, the BSP said, equivalent to 7.5 months worth of imports of goods and payments of services and primary income, and 5.5 times the country’s short-term external debt falling due within 12 months and 4.1 times such short-term foreign debt plus principal payments on medium- and long-term loans of the public and private sectors falling due within a year.

WHAT THE NUMBERS COULD MEAN
“This bodes well for economic growth,” UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said in a mobile phone message.

“It tells one that OFW remittances and the attractiveness of the Philippines as a potential investment destination is… helping the external standing afloat,” he explained, while noting that “[t]his continues to prove that the consumption-led economy needs other pillars that will sustain growth in the medium to longer term.”

For Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, “[s]tronger BoP surplus data also reflect some investment gains from overseas by Philippine-based investors and by the government, as may also be reflected in the… increase in GIR in October, which is near the record high of $86.1 billion posted in September 2016.”

Bank of the Philippine Islands Lead Economist Emilio S. Neri said in a text message, however, that the “positive BoP position in 2019 — which has been driven by import compression, portfolio capital inflows, stronger remittance flows and POGO (Philippine offshore gaming operators)-led tourism receipts against a backdrop of declining foreign direct investments and merchandise exports is not exactly the kind of surplus that supports an inclusive and more meaningful economic growth.”

“If the resulting strengthening of the peso and subdued inflation meant the economy incurred a sizeable public spending backlog in infrastructure, then this year’s BoP surplus probably means our potential to generate more meaningful growth in incomes and jobs in the medium to long term has been somehow sacrificed.”

BoP had surpassed the central bank’s $3.7-billion surplus projection for full-year 2019 with the $3.797-billion surfeit recorded by the end of March. Monthly balances have remained above that level since then.

Last year ended with a $2.306-billion BoP deficit that was nearly three times 2017’s $863-million gap but was less than half the $5.5-billion external payments gap which the central bank had expected for 2018. — Luz Wendy T. Noble