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Philippines: Balance of payments reverts to deficit in January
MANILA, Philippines — The country’s balance of payments (BOP) position recorded a deficit of $102 million in January, ending three straight months of surpluses, as more foreign exchange flowed out of the country to pay the government’s maturing foreign debt, according to the Bangko Sentral ng Pilipinas (BSP).
Last month’s BOP shortfall was a complete reversal of the $1.34 billion surplus recorded in December last year.
However, the amount was lower than the $752 million deficit recorded in the same month last year.
“The BOP deficit in January 2022 reflected outflows arising mainly from the national government’s payments of its foreign currency debt obligations,” the BSP said.
The BOP is the difference in total values between payments into and out of the country over a period. A deficit means more dollars flowed out 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 (BPO) earnings and tourism receipts.
According to the BSP, the BOP position reflects a decrease in the final gross international reserves (GIR) level to $107.69 billion in end-January from $108.79 billion in end-December last year.
The latest foreign exchange buffer represents a more than adequate external liquidity buffer equivalent to 10.2 months’ worth of imports of goods and payments of services and primary income. It is also about 8.4 times the country’s short-term external debt based on original maturity and 5.7 times based on residual maturity.
The country’s BOP surplus plunged by 90.4 percent to $1.34 billion last year from an all-time high of $16.02 billion in 2020, lower than the $1.6 billion target set by the BSP.
This after the country’s trade deficit ballooned by 75.4 percent to a record high of $43.13 billion last year as the economy continued to gradually reopen.
Imports grew by 31.1 percent to an all-time high of $117.78 billion last year from $89.81 billion a year ago, while exports grew by a slower 14.5 percent to $74.64 billion from $65.21 billion.
Personal remittances from overseas Filipino workers grew by more than five percent to an all-time high of $34.88 billion last year. Cash remittances coursed through banks also grew by 5.1 percent to a record high of $31.42 billion.
Likewise, net foreign direct investments (FDIs) inflow jumped by 52.5 percent to $9.24 billion from January to November last year compared to $6.06 billion in the same period in 2020.
The BSP’s $8 billion target for FDIs in 2021 was surpassed as early as October amid the country’s recovery from the pandemic-induced recession.
For this year, the BSP expects a smaller BOP surplus of $700 million instead of $1.7 billion while the GIR may reach only $112 billion, also smaller than the original target of $115 billion.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said proceeds from the government’s foreign borrowings and other fund-raising activities as well as those raised by the private sector in the coming months would be added to the country’s BOP.
He also said the inflows would also help build up the country’s foreign exchange buffers to new record high levels in the coming months, but this may be offset by any pick up in imports and wider trade deficits if the economy re-opens and recovers further.
“Going forward, any improvement in the BOP and GIR for the coming months could help provide greater support for the peso exchange rate versus the dollar especially against any speculative attacks,” Ricafort said.
Source: https://www.philstar.com/business/2022/02/20/2161939/balance-payments-reverts-deficit-january