GIORGIO TROVATO-UNSPLASH

The country’s balance of payments (BoP) position remained in a deficit for a fourth straight month in July, as more dollars flowed out of the country to pay for the government’s foreign debt.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed the BoP deficit widened to $1.819 billion in July, a turnaround from the $642 million surplus in the same month last year.

This is also the widest deficit posted in 17 months or since $2.019 billion in February 2021. The July deficit is also higher than the $1.574 billion gap in June.

Philippines: Balance of payments“The BoP deficit in July 2022 reflected outflows arising mainly from the National Government’s (NG) 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 measures the country’s transactions with the rest of the world at a given time. A deficit means more funds fled the economy than what went in, while a surplus shows that more money entered the Philippines.

In the first seven months of the year, the BoP deficit widened to $4.920 billion, from the $1.297 billion deficit in the same period in 2021.

“Based on preliminary data, this cumulative BoP deficit reflected the widening trade in goods deficit,” the central bank said.

The trade deficit for January-June 2022 reached $29.793 billion, up from the $17.953 billion deficit posted in the same period last year, preliminary data from the Philippine Statistics Authority’s (PSA) showed.

The central bank also noted that this BoP position reflects the final gross international reserves (GIR) level of $99.8 billion as of end-July, 1.09% lower than the $100.9 billion as of end-June.

“Nonetheless, the latest GIR level represents a more than adequate external liquidity buffer equivalent to 8.3 months’ worth of imports of goods and payments of services and primary income,” the BSP said.

“Specifically, it ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans.”

The GIR can also cover up to 7.2 times the country’s short-term external debt based on original maturity and 4.6 times based on residual maturity.

“Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months,” the central bank said.

China Banking Corp. Chief Economist Domini S. Velasquez said the BoP deficit may narrow slightly in the next few months, as global commodity prices subside.

“Downside risks to BoP is that lower import prices will be challenged by anemic growth in exports as global growth slows. Additionally, as the national government pays off its foreign currency debt and shifts to domestic sources, additional withdrawals are likely,” Ms. Velasquez said.

Earlier, the Monetary Board revised its BoP deficit forecast to $6.3 billion, or equivalent to -1.5% of gross domestic product (GDP), higher than the previous projection of a $4.3 billion gap (-1% of GDP).

The BSP also projected a wider current account deficit at $19.1 billion (-4.6% of GDP) this year, from $16.3 billion (-3.8% of GDP) previously.

The country’s GIR is expected to hit $105 billion by end-2022 and $106 billion by end-2023, lower than the March projections of $108 billion and $109 billion, respectively. – Keisha B. Ta-asan