THE country saw a thinner surplus in its balance of payments (BoP) position in March on the back of hot money outflows and a narrower trade deficit.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that BoP recorded a surplus for the second straight month at $448 million in March, smaller than the $627-million surfeit seen in the same month of 2019 as well as the $839 million recorded in February.

The surplus is lowest since the $541-million surfeit in November.

The BoP paints a summarized picture of the economic transactions of the country with the rest of the world within a given period.

“The BoP surplus in March 2020 reflected mainly the inflows arising from the BSP’s foreign exchange operations as well as income from its investments abroad, and the national government’s foreign currency deposits with the BSP,” the central bank said on Tuesday.

The inflows were partially offset by foreign currency withdrawals made by the national government to pay its foreign currency debt obligations, it added.

The BoP position also reflects the final gross international reserves (GIR) worth $88.86 billion as of end-March, enough to cover around 7.9 months of imports of goods and services as well as payments of primary income. It is also around 5.3 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.

According to Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort, the slimmer BoP surplus reflects the heavy hot money outflows, which reached $961.05 million in March.

“This was amid net foreign portfolio investments outflow in March 2020 amid the lockdown in Luzon and also the global concerns over COVID-19 spreading to other countries worldwide beyond China,” he said in an e-mail.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the narrower trade deficit supported the BoP surplus for the second successive month.

“The BoP surplus may have resulted from a narrowing trade deficit owing to falling imports as remittance flows managed to grow in the (first quarter) of the year,” Mr. Mapa said in an e-mail.

Data from the Philippine Statistics Authority showed the country’s trade deficit hit $2.38 billion in March, smaller than the $3.33-billion deficit seen in the same month last year but wider compared to the $1.66-billion deficit logged in February.

Meanwhile, cash remittances from overseas Filipino workers grew by 2.5% year on year to $2.301 billion in February, as the pandemic crisis affected many economies where inflows came from.

In the first three months of the year, the BoP recorded a deficit of $68 billion, a reversal compared to the $3.797-billion surplus in the January to March 2019 period.

The BSP in November projected BoP to settle at a $3-billion surplus in 2020.

Crucial to the BoP position will be the borrowings during the pandemic crisis, according to Mr. Mapa.

“Going forward, we expect the BoP to be supported largely by the financial account with the government securing foreign borrowings to help fund the COVID-19 rescue efforts,” he said.

Mr. Ricafort said that bright spots may arise with improved market sentiment as the economy gradually reopens.

Starting June 1, most areas in the country have been placed under modified general community quarantine, while key cities including Metro Manila is under general community quarantine.

“For the coming months, net foreign portfolio investments outflows could ease and BoP data could correspondingly improve amid recent gains in the local financial markets,” he said. — Luz Wendy T. Noble

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