THE COUNTRY’S dollar reserves slipped at end-January as the government paid its foreign exchange obligations, latest central bank data showed.

Preliminary data from the Bangko Sentral ng Pilipinas (BSP) released on Friday showed gross international reserves (GIR) stood at $86.422 billion as of January, down by 1.61% from the $87.839 billion seen at end-December but still higher by 4.77% from the $82.481 billion seen as of end-January 2019.

The end-January turnout ended five successive months of higher dollar reserves. Despite this, the level was still within the $86-billion target GIR level of the central bank for this year.

“The month-on-month decline in the GIR level reflected outflows arising from the national government’s foreign exchange withdrawal, which was used mainly to pay its foreign exchange obligations,” the BSP said in a statement.

Despite the decline, the GIR can still provide cover for 7.6 months’ worth of imports of goods and services and payments of primary income.

The BSP added that the reserve level is also “equivalent to 5.3 times the country’s short-term external debt based on original maturity and four times based on residual maturity”.

The central bank’s gold reserves, which form part of the country’s foreign exchange buffer, was steady at $8.016 billion for the eighth consecutive month since June but slipped 4.65% from the $8.407 billion logged at end-January 2019.

Meanwhile, gains from investments abroad, which accounted for the bulk of dollar reserves, stood at $73.97 billion, climbing from the end-December and end-January 2019 levels of $75.303 billion and $69.969 billion, respectively.

The country’s reserve position in the International Monetary Fund (IMF) also slipped to $588 million from the $590.4 million seen as of end-December. However, it was still higher compared to the $477.2 million seen a year prior.

BSP data also showed that foreign currency deposits went down to $2.667 billion from the $2.747 billion as of end-December, although still higher than end-January 2019’s $2.441 billion.

Special drawing rights — or the amount which the Philippines can tap from the IMF’s reserve currency basket — was steady for the second month at $1.181 billion but lower compared to the $1.192 billion seen at end-January 2019.

Net international reserves (NIR), which refers to the difference between the central bank’s dollar reserves and total short-term liabilities, likewise slipped to $86.42 billion as of end-January 2020 from the end-December 2019 level of $87.84 billion.

Sought for comment, UnionBank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said aside from the government needing to pay off its obligations in the beginning of the year, the lower GIR level also came after global events.

“It was rather a turbulent start for 2020 with various events happening such as the short-lived US-Iran issue, the Taal volcano eruption, and now, the 2019-nCoV (novel coronavirus) outbreak that is still unfolding,” he said in an email.

“These events have brought volatility in various markets and the most recent one, the far-reaching economic impact still very much unknown,” Mr. Asuncion added, noting that GIR for the rest of 2020 is likely to resiliently grow in 2020 despite some short-term risks.

For his part, ING Bank-NV Manila Senior Economist Nicholas Antonio T. Mapa noted that aside from the GIR, consistent remittance and BPO (business process outsourcing) flows will help augment export receipts and provide support to the economy.

“Previously it [GIR] was the first and only line of defense against fluctuations in spot trading or speculative attacks on the currency but now it is but one of several lines of defense with other measures and facilities in place to weather impending financial market storms,” Mr. Mapa said in an email, noting that GIR remains to be healthy and still provides ample support to the financial market.

Security Bank Corp. Chief Economist Robert Dan J. Roces also said the current reserve level continues to provide “potent buffer to protect the country from any possible fallout against the peso.

“Lesser current linkage with greater China compared with our regional neighbors means the peso is more insulated from negative impact from the coronavirus epidemic,” he said in an email, noting that they forecast the peso to trade at P51 a dollar by the end of the first quarter. — Luz Wendy T. Noble