BOP deficit more than doubles in 2 months

MANILA, Philippines — The balance of payments (BOP) position of the Philippines continued to bleed as the deficit more than doubled in the first two months of the year with more US dollars exiting the country.

Data released by the Bangko Sentral ng Pilipinas (BSP) showed the BOP shortfall reached $961 million in the first two months of the year, 116 percent higher than the $445 million deficit recorded in the same period last year.

“The higher cumulative BOP deficit for the first two months of the year may be attributed partly to the widening trade deficit in January, as well as higher net outflows of foreign portfolio investments,” the central bank said.

The BOP is the record of all international financial transactions made by a country’s residents. A deficit means the country imports more goods, services and capital than it exports.

For the month of February alone, the BSP said the BOP deficit amounted to $429 million slightly lower than the $531 million shortfall recorded last January and the $436 million deficit in the same month last year.

“Outflows in February stemmed mainly from foreign exchange operations of the BSP and payments made by the national government for its maturing foreign exchange obligations,” the BSP added.

However, the outflows were partially offset by the net foreign currency deposits of the national government, as well as the income from the central bank’s investments abroad.

Latest data showed foreign portfolio investment or hot money reverted to a net outflow in February as investors cashed in on their profits with the impending rate hikes by the US Federal Reserve.

Hot money or speculative investments yielded a net outflow of $545.14 million in February, reversing the $126.16 million inflow recorded in January. The BSP sees a net outflow of hot money reaching $900 million this year.

The country’s merchandise exports was almost unchanged at $5.22 billion in January from $5.19 billion in the same month last year, while imports surged 11.4 percent to $8.54 billion from $7.67 billion.

This translated to a higher trade deficit of $3.32 billion in January from $2.47 billion in the same month last year. Imports of capital and raw materials continue to rise due to the country’s expanding economy.

The BSP expects the country to book a BOP deficit of $1 billion or 0.3 percent of gross domestic product (GDP) as it sees more foreign exchange exiting the Philippines.

The country booked a BOP deficit of $863 million last year, more than double the $420 million shortfall registered in 2016 brought about largely by the big reversal in foreign portfolio investments due to external shocks.

The BSP was looking at a BOP deficit of $1.4 billion or 0.5 percent of GDP.

A declining BOP position would result to the thinning of the country’s foreign exchange buffer that serves as protection against external shocks.

The BSP said the BOP position reflected the final gross international reserve (GIR) level of $80.4 billion in end February, equivalent to 7.9 months’ worth of imports of goods and payments of services.