By Luisa Maria Jacinta C. Jocson, Reporter

THE COUNTRY posted a balance of payments (BoP) deficit of $724 million in October as the government repaid external debt, the Bangko Sentral ng Pilipinas (BSP) said.

This was a reversal of the $1.51-billion surplus a year ago and $3.526-billion surfeit in September.

“The BoP deficit in October 2024 reflected the National Government’s (NG) net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said in a statement.

The BoP summarizes the country’s transactions with the rest of the world. A deficit means more funds left the country, while a surplus shows that more money came in.

Latest data from the Bureau of the Treasury (BTr) showed that the NG’s outstanding debt rose to a record-high P15.89 trillion as of end-September.

The bulk (68.81%) of the debt stock came from domestic sources while the remainder was from foreign creditors.

External debt rose by 9.3% to P4.96 trillion at end-September from a year ago.

Central bank data showed the BoP reflected a final gross international reserve (GIR) level of $111.1 billion as of end-October, down from $112.7 billion a month earlier.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that despite the decline, the reserve level has been above the $100-billion mark for over a year or 13 straight months.

“Still a relatively high GIR, the second highest on record, partly due to net income from the BSP’s foreign investments amid gains in most global financial markets recently on market expectations on the series of Fed rate cuts from 2024-2026,” he added.

The US Federal Reserve began its rate-cutting cycle in September with a half-percentage-point reduction and delivered another quarter of a percentage-point cut earlier this month.

Markets are anticipating another quarter-point rate cut at its last meeting for the year in December.

Data from the central bank showed the dollar buffer was enough to cover 4.4 times the country’s short-term external debt based on residual maturity.

It was also equivalent to eight months’ worth of imports of goods and payments of services and primary income.

An ample level of foreign exchange buffers safeguards an economy from market volatility and is an assurance of the country’s capability to pay debts in the event of an economic downturn.

Mr. Ricafort said the deficit position in October was due to the country’s continued trade deficit.

The Philippines’ trade-in-goods balance stood at a $5.09-billion deficit in September, the widest in 20 months.

The country’s balance of trade in goods has been in the red for over nine years since the $64.95-million surplus recorded in May 2015.

Mr. Ricafort also noted volatility due to geopolitical risks and markets pricing in the incoming Trump administration’s restrictive trade policies.

10-MONTH SURPLUS
Meanwhile, the country’s BoP position registered a $4.393-billion surplus in the 10-month period, widening from the $3.246-billion surplus a year ago.

“The surplus reflected in part the continued net inflows from personal remittances, trade in services, and net foreign borrowings by the NG,” the central bank said.

“Furthermore, net foreign direct and portfolio investments contributed to the BoP surplus,” it added.

Latest data from the BSP showed foreign direct investment (FDI) net inflows rose by 3.9% year on year to $6.07 billion in the first eight months.

Meanwhile, foreign portfolio investments yielded a net inflow of $3.02 billion in the January-September period, significantly higher than the $387.24-million inflow last year.

“For the coming months, the BoP data could improve, thereby could also lead to better GIR, partly due to the proceeds of the National Government’s foreign currency-denominated borrowings from both commercial sources that would also be added to the country’s BoP and GIR,” Mr. Ricafort said.

He also noted continued growth in overseas Filipino worker remittances, business process outsourcing  revenues, exports and foreign tourism receipts.

“Going forward, any improvement in BoP data and in GIR data for the coming months could still help provide a greater cushion for the peso exchange rate (against) the US dollar especially versus any speculative attacks, as well as help strengthen the country’s external position,” he added.

The BSP expects a $2.3-billion BoP surplus by yearend, equivalent to 0.5% of economic output.

By Luisa Maria Jacinta C. Jocson, Reporter

INFLATIONARY PRESSURES could prompt the Philippine central bank to pause its easing cycle, but a slowdown in growth may leave room for another rate cut, its governor said on Wednesday.

“Inflation pressures may cause us maybe to pause a bit, but weak growth may cause us to cut,” Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. told reporters on the sidelines of an event on Wednesday.

Depending on the data, he said the Monetary Board may cut or pause at its Dec. 19 meeting.

This year, the BSP has delivered a total of 50 basis points (bps) worth of rate cuts in increments of 25-bp reductions at its August and October meetings.

“Based on our readings, there are still pressures on inflation, and the economy is also a bit weak as seen in the third quarter number,” he said in mixed English and Filipino.

Philippine gross domestic product (GDP) slowed to 5.2% in the July-to-September period from 6.4% in the second quarter and 6% a year ago.

This was also the weakest growth since the 4.3% expansion in the second quarter of last year.

In the first nine months, GDP grew by 5.8%. The economy would need to grow by at least 6.5% in the fourth quarter to meet the lower end of the government’s 6-7% target.

Mr. Remolona said November inflation is likely to remain within the 2-4% target band based on the BSP’s latest projections.

Headline inflation picked up to 2.3% in October, bringing the 10-month average to 3.3%.

The BSP’s baseline forecasts see inflation settling at 3.1% this year, 3.2% in 2025 and 3.4% in 2026.

The central bank also earlier said the balance of risks to the inflation outlook for 2025 and 2026 shifted to the upside but will likely continue to remain within target.

BSP Assistant Governor Zeno R. Abenoja said that November inflation may reflect the typhoon damage in October, but the impact from the multiple storms that hit the country in November will likely be reflected in December inflation data.

“Based on the Department of Agriculture (DA), they estimated that about 70% of the harvest was done when the typhoons started coming in, the last four typhoons,” he said.

“Hopefully, the impact will be limited, but it’s the next cycle that may be affected,” he added.

Latest data from the DA showed that the combined agriculture damage due to tropical cyclones Kristine and Leon, which made landfall in the country in late October, reached P9.81 billion.

Meanwhile, the BSP chief said that the peso’s performance is not a factor that the central bank considers in its monetary policy decisions.

“Usually, they’re different, the exchange rate and the policy rate. We don’t use the policy rate to control the exchange rate. That’s a different matter,” Mr. Remolona said.

The peso has been recently trading at the P58-per-dollar range, teetering closer to the P59 level.

Mr. Remolona earlier said he is not worried about the peso’s weakness, though the central bank has been intervening in “small amounts” following the peso depreciation amid the announcement of Donald J. Trump’s election as US President. 

THE PESO sank to an over two-year low on Wednesday amid escalation in the Russia-Ukraine war as well as further signals on US President-elect Donald J. Trump’s economic policies.

The local unit closed at P58.91 per dollar on Wednesday, weakening by 10 centavos from its P58.81 finish on Tuesday, Bankers Association of the Philippines data showed.

This was the peso’s weakest close in 25 months or since its P58.94 close on Oct. 20, 2022.

The peso opened the session at P58.80 against the dollar with its intraday best at P58.77. Meanwhile, it dropped to as low as P58.925 versus the greenback.

Dollars exchanged went down to $1.096 billion on Wednesday from $1.473 billion on Tuesday.

The first trader said in a phone call that the peso slipped amid an escalation in the Russia-Ukraine war.

“The US dollar-peso exchange rate is also higher amid some geopolitical risks related to the Russia-Ukraine war lately,” Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said in a Viber message.

Reuters reported that Russian President Vladimir Putin on Tuesday lowered the threshold for a nuclear strike in response to a broader range of conventional attacks, days after reports said Washington had allowed Ukraine to use US-made weapons to strike deep into Russia.

Ukraine used United States-made Army Tactical Missile System (ATACMS) missiles to strike Russian territory on Tuesday. However, Moscow said the use of ATACMS, the longest-range missiles Washington has supplied to Ukraine so far, was a clear signal the West wanted to escalate the conflict.

The second trader in an e-mail said that the peso depreciated after reports that Mr. Trump has narrowed his choice for Treasury secretary.

Bloomberg News reported Mr. Trump was set to interview former Federal Reserve Governor Kevin Warsh and Apollo Global Management Chief Executive Officer Marc Rowan for the post of Treasury secretary.

“However, (Mr. Warsh’s) previous experience in the Fed might give him an edge over other candidates for the position… his pick is widely viewed as supportive of his alternative approach to the US central bank, falling in line with the US economic plans by Trump,” the trader said.

Mr. Ricafort also noted the latest balance of payments (BoP) data, which posted a deficit position.

The country posted a BoP deficit of $724 million in October, a reversal of the $1.51-billion surplus a year ago and $3.526-billion surfeit in September, latest central bank data showed.

The second trader said the peso may stay close to the P59-per-dollar level in the near term.

“The peso is likely to remain elevated near the P59 level as growing geopolitical concerns and uncertainties on Trump policies continue to drive demand for the greenback,” the second trader said.

In October 2022, the peso hit a record low of P59 against the dollar, which led to inflationary pressures and prompted the central bank to intervene.

BSP Governor Eli M. Remolona, Jr. has said that the peso’s recent weakness is not a cause for concern as it was expected that the dollar strengthened after Mr. Trump was elected US President.

However, he said that the central bank has had to intervene in “small amounts.”

For Thursday, the first trader expects the peso to move between P58.60 and P58.95 while the second trader sees the peso trading from P58.75 to P59.

Meanwhile, Mr. Ricafort expects it to range from P58.75 to P58.95. — L.M.J.C.Jocson