Foreign loans send Philippine dollar position in surplus territory in March

• Apr 20, 2023

MANILA, Philippines — The country’s dollar position rebounded to surplus territory in March on the back of the Marcos Jr. administration’s foreign currency loans.

Data released by the Bangko Sentral ng Pilipinas on Wednesday showed the country’s balance of payments position landed a surplus of $1.3 billion in March. This was larger compared to the surplus of $754 million posted a year ago.

The BOP is a summary of the country’s transactions with the world for a specific period of time. A deficit happens when foreign fund outflows exceed inflows.

Year-to-date, this fattened the country’s BOP position to $3.5 billion surplus. The surplus in March came from inflows from foreign currency loans taken out by the national government, among others. 

“The BOP surplus in March 2023 reflected inflows arising mainly from the National Government’s (NG) net foreign currency loans, which were deposited with the BSP, and net income from the BSP’s investments abroad,” the statement read. 

For context, the BSP noted those loans came from the lending arm of the World Bank Group, the International Bank for Reconstruction and Development, and the Asian Development Bank. Inflows from those loans hit a total of $1.6 billion. 

Domini Velasquez, chief economist at China Banking Corp., said the surplus recorded in March likely came as the country’s trade deficit was slowly trimmed. 

“Latest trade data showed that the deficit in February was at the lowest in four months amid a weaker outturn in both exports and imports,” she said in a Viber message.

Even then, Velasquez expects the country’s dollar position to close with a narrower deficit compared to a year ago as price pressures remain. The BOP position ended 2022 with a deficit of $7.3 billion. 

“The subdued external outlook as advanced economies continue to face recessionary risk will keep exports weak, but we expect Chinese demand to buoy exports towards the second half of the year. Foreign investments may also support the BOP due to investment-friendly reforms (e.g. RCEP, amended PSA, full foreign ownership of renewable energy sector),” she added. — Ramon Royandoyan

Source: https://www.philstar.com/business/2023/04/19/2260111/foreign-loans-send-philippine-dollar-position-surplus-territory-march