Loan payments send Philippine dollar position to a deficit in June

MANILA, Philippines — The country’s dollar position found itself in familiar territory in June by landing into a deficit, but an analyst expects the shortfall to narrow by yearend.

Data sent by the Bangko Sentral ng Pilipinas on Wednesday showed that the country’s balance of payments hit a deficit of $606 million in June. This was markedly lower compared to the $1.6 billion deficit recorded in the same period 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, the country’s dollar position tallied a $2.3 billion surplus in the first six months of the year, marking a reversal from the $3.1 billion shortfall in the same period in 2022. 

“The BOP deficit in June 2023 reflected outflows arising mainly from the National Government’s 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. 

The BSP projected the country’s dollar position to land a $1.2 billion deficit in 2023, owing

Domini Velasquez, chief economist at China Banking Corp., explained that the retreating deficit was aided by various developments.

“The country’s BOP continues to be helped by smaller merchandise trade deficit. Additionally, exports of services have jumped from a year ago, helping lift the current account in a period of lackluster global trade. Remittances prove to be resilient also due to better economic conditions in host countries and declining inflation rates across the world,” she said in a Viber message.

Velasquez projects that at this pace, the BOP “would outperform” the BSP’s dollar position projection. 

“Moving forward, we expect the trade deficit to remain relatively narrow (compared with last year) given the price impact of more moderate commodity prices on imports and possible export recovery towards the end of the year,” she added. — Ramon Royandoyan