Philippines: Higher debt payments plunge BOP into deficit

MANILA, Philippines — More dollars flowed out of the country in May as the national government paid foreign debt that ballooned as a result of higher borrowings to augment funds for pandemic response, the Bangko Sentral ng Pilipinas (BSP) said.

Data released by the central bank showed the balance of payments (BOP) plunged to a deficit of $1.39 billion in May, reversing the $2.61 billion surplus in April and $2.43 billion surplus recorded in May last year.

“The BOP deficit in May 2021 was mainly attributed to outflows arising from the foreign currency withdrawals of the national government from its deposits with the BSP as the government settled its foreign currency debt obligations and paid for various expenditures,” the BSP said.

The BOP is the difference between payments into and out of the country over a specific period.

A deficit means more dollars flowed out of the country to pay for the importation of more goods, services and capital than what came in from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing earnings and tourism receipts.

The BSP said inflows from the central bank’s foreign exchange operations and from the national government’s external borrowings that were deposited with the BSP partly offset the outflows.

For the first five months of the year, the Philippines incurred a BOP deficit of $1.63 billion, reversing the $4.03 billion surplus recorded in the same period last year.

“Based on preliminary data, this cumulative BOP deficit was partly attributed to wider merchandise trade deficit and net outflows of foreign portfolio investments,” the central bank said.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit widened by 28.3 percent to $11.09 billion from January to April this year compared to $8.64 billion in the same quarter last year.

During the period, imports jumped by 21.9 percent to $34.46 billion from $28.27 billion, while exports increased by 19 percent to $23.37 billion from $19.63 billion as the global economy recovers from the recession.

The central bank is now looking at a higher BOP surplus of $7.1 billion or 1.9 percent of gross domestic product (GDP) instead of $6.2 billion or 1.6 percent of GDP this year.

“Overall, the latest BOP assessment for 2021 reflects sustained optimism fueled by expectations of improved global and domestic economic landscape moving into the second half of 2021,” BSP managing director Zeno Ronald Abenoja earlier said.