BoP deficit narrows in April

THE PHILIPPINES’ overall balance of payments (BoP) position stood at a $148-million deficit in April, narrower than the $415-million gap in the same month a year ago.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed the BoP gap in April was a reversal of the $1.27-billion surplus in March.

April also saw the widest deficit since the $895-million gap in February.

“The BoP deficit in April 2023 reflected outflows arising mainly from the National Government’s (NG) payments of its foreign currency debt obligations,” 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.

For the January-to-April period, the BoP posted a $3.31-billion surplus, significantly higher than the $79-million surfeit a year ago.

“Based on preliminary data, the cumulative BoP surplus reflected inflows that stemmed mainly from personal remittances, net foreign borrowings by the NG, and foreign direct investments,” the BSP said.

The BoP as of end-April reflects final gross international reserves (GIR) of $101.8 billion, up by 0.3% from $101.5 billion a month prior.

The central bank said this is due to the upward revaluation adjustments in BSP gold holdings and foreign currency denominated assets.

The dollar buffer is enough to service 7.6 months’ worth of imports of goods and payments of services and primary income.

The GIR can also cover up to six times the short-term external debt based on original maturity and 4.1 times based on residual maturity.

ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said the more modest BoP deficit in April was in line with the current account deficit.

“Although the current account balance remains in shortfall, the narrowing of the trade gap versus last year could have helped in limiting the current account deficit and overall BoP balance,” he said in a Viber message.

Latest BSP data showed the current account deficit stood at $17.8 billion last year, wider than the $5.9-billion shortfall seen in 2021.

The BSP is now looking at the current account balance ending the year at a $17.1-billion deficit, equivalent to -4% of gross domestic product (GDP).

“We could see narrower trade deficits in the coming months versus last year. Trade deficits last year were wider partly due to the outsized increase in energy imports due to surging commodity prices,” Mr. Mapa said. 

The trade-in-goods deficit widened to $4.93 billion in March, from the $3.91-billion shortfall in the previous month and the $4.59-billion deficit in March last year.

The country’s trade deficit in 2022 stood at $58.24 billion, the largest since 1991.

“Improving BoP (position) possibly reflects smaller trade deficits and resilient remittances. Exports fell sharply in the first quarter, but we expect it to improve moving forward,” China Banking Corp. Chief Economist Domini S. Velasquez said in a Viber message.

For the first quarter, exports declined by 13.2% to $16.86 billion, while imports slipped by 3.3% to $31.44 billion. This brought the trade deficit to $14.58 billion in the first three months of the year, wider than the $13.08-billion gap in the January-to-March period last year.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the trade deficit may have narrowed in recent months as global oil prices hovered at around 17-month lows in late March.

According to Ms. Velasquez, better economic conditions in advanced economies may help improve exports in the coming months.

“Lower oil prices relative to last year should also squeeze imports. Hence, in the second quarter and third quarter, we think the country will post smaller BoP deficits,” she said, adding that this could help support the peso against the dollar.

Likewise, ING’s Mr. Mapa said lower energy prices this year could help narrow the trade deficit this year.

“For the coming months, BoP data could still be supported by the continued growth in the country’s structural US dollar inflows such as remittances, business process outsourcing revenues, foreign investments, exports, foreign tourism receipts, among others,” Mr. Ricafort said.

The country’s BoP position is likely to yield a deficit of $1.6 billion this year or equivalent to -0.4% of GDP, based on BSP projections. This would be narrower than the $7.3-billion deficit in 2022. — K.B.Ta-asan