Philippines: BOP deficit widens in March
MANILA, Philippines – The Philippines’ balance of payments (BOP) remained in deficit in March, the widest in four months, as more money flew out of the country against the capital that came in.
This is the sixth consecutive month the country incurred a BOP deficit, data from the Bangko Sentral ng Pilipinas (BSP) showed.
The deficit recorded in March was a reversal of the $854 million surplus recorded in the same month last year. It was also higher than the $436 million deficit posted in February.
As of the first quarter, the BOP deficit further widened to $994 million, from the $210 million deficit recorded in the same period last year.
The BOP shows a summary of a country’s transactions with the rest of the world. Components include trade, foreign direct and portfolio investments, and even remittances from Filipinos abroad.
A deficit means more money went out of the country while a surplus means otherwise.
Emilio Neri, lead economist at Bank of the Philippine Islands, said the deficit was likely caused by foreign portfolio investment outflows.
“It’s probably a result of portfolio investment because there was a bit of an improvement of the trade account,” Neri told The STAR in a phone interview.
With BOP hitting negative for second straight quarters, ING Bank Manila senior economist Joey Cuyegkeng said the “likelihood of another deficit of the current account is high.”
“If this is the case for 1Q 2017, then this would represent also a second straight quarter of a current account deficit. We may need to revisit our base case of a current account surplus this year,” he said.
But Cuyegkeng said he still expects a current account surplus of $700 million to $800 million or about 0.2 percent of the GDP for the whole 2017.
“If the worst case develops, then we would be back to a twin deficit environment. A rising ratio of the twin deficits to GDP (a worse case) could raise concerns and affect investor confidence about the country’s credit rating,” Cuyegkeng said.
The BSP expects a BOP surplus of $1 billion for this year as foreign direct investments inflow is seen hitting $7 billion while the outflow of foreign portfolio investments or hot money is expected to drop to $900 million.