Philippines’ BoP deficit widens
THE COUNTRY’S balance of payments (BoP) deficit widened in April as the government paid back foreign debt and the trade balance remained in a deficit, the Bangko Sentral ng Pilipinas (BSP) said.
Data from the central bank showed the BoP position widened to a $639-million deficit in April from the $148-million gap a year ago.
This was also a reversal from the $1.17-billion surplus recorded in March.
The BoP measures the country’s transactions with the rest of the world at a given time. A deficit means more funds left the economy than what went in, while a surplus shows that more money entered the Philippines.
“The BoP deficit in April 2024 reflected outflows arising mainly from 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 central bank said in a statement.
In the first four months, the BoP position swung to a deficit of $401 million from the $3.3-billion surplus posted a year ago.
“Based on preliminary data, this cumulative BoP deficit reflected mainly the NG’s repayments of its foreign loans coupled with the continued trade in goods deficit,” it added.
The trade deficit sharply narrowed to $3.18 billion in March from the $5.02-billion deficit a year ago. In the first quarter, the trade deficit shrank by 22.2% year on year to $11.24 billion.
Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said that the BoP deficit was due to payment of foreign obligations. This included the scheduled repayment of $365 million in matured Japanese yen bonds on April 12.
In the first quarter, debt repayments jumped by 74% to P986.036 billion. These include the P93.37 billion in principal payments on external debt and P54.11-billion in interest payments on external debt.
At its end-April position, the BoP reflected a final gross international reserve (GIR) level of $102.6 billion, 1.4% lower than $104.1 billion as of end-March.
The dollar reserves were enough to cover 5.8 times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.
It is also equivalent to 7.6 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.
For the coming months, Mr. Ricafort said that the BoP position could improve “partly due to proceeds of the National Government’s foreign currency-denominated borrowing that would also be added to the country’s BoP and GIR as well as from official development assistance and other multilateral sources.”
In May, the government raised $2 billion from its issuance of the dual-tranche 10- and 25-year fixed-rate dollar bonds. This was the Philippines’ first global bond sale for this year.
Mr. Ricafort also noted continued growth in remittances, business process outsourcing (BPO) revenues, foreign tourism receipts and foreign direct investments would help support the BoP position.
This year, the BSP expects the country’s BoP position to end at a $700-million deficit, equivalent to 0.1% of GDP. — Luisa Maria Jacinta C. Jocson