Philippines posts $754 million BOP surplus

MANILA, Philippines — The Philippines finally booked a balance of payments (BOP) surplus in March, ending two straight months of deficit, as the government tapped the offshore debt market to fund COVID response measures as well as key infrastructure projects, according to the Bangko Sentral ng Pilipinas (BSP).

The country’s BOP position yielded a $754 million surplus in March, reversing the $73 million deficit in the same month last year as well as the $157 million shortfall recorded in February.

“The BOP surplus in March   reflected inflows arising mainly from the national government’s net foreign currency deposits with the BSP and its income from investments abroad,” the central bank said.

The Philippines successfully raised $2.25 billion from its first foray into the offshore bond market this year despite the volatile global financial market. The fund raising activity included the maiden $1-billion green bond issuance.

To fund the widening budget deficit, the government plans to borrow P2.2 trillion this year, of which about 25 percent will come from global bond issuance and official development assistance (ODA) loans.

The BOP is the difference in total values between payments into and out of the country over a period. A surplus means more dollars flowed in from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing (BPO) earnings and tourism receipts than what went out to pay for the importation of more goods, services and capital.

For the first quarter, the BSP said the country recorded a BOP surplus of $495 million, a turnaround from the previous year’s $2.84 billion deficit.

“Based on preliminary data, the cumulative BOP surplus reflected inflows, such as from personal remittances, net foreign borrowings by the national government, and foreign direct and portfolio investments,” the BSP said.

Latest data from the BSP showed personal remittances climbed by 1.9 percent to $5.76 billion in the first two months   from $5.65 billion in the same period last year, while cash remittances coursed through banks also inched up by 1.9 percent to $5.18 billion from $5.08 billion.

On the other hand, the net inflow of foreign direct investments declined by 16 percent to $819 million in January from $975 million in the same month last year as the National Capital Region and nearby provinces were placed under Alert Level 3, with COVID-19 cases hitting daily record highs caused by the more contagious Omicron variant.

According to the BSP, the BOP position reflects a slight 0.5 percent decrease in the final gross international reserves (GIR) level to $107.31 billion in end-March from $107.8 billion in end-February.

The latest foreign exchange buffer represents a more than adequate external liquidity buffer equivalent to 9.5 months’ worth of imports of goods and payments of services and primary income. It is also about 7.1 times the country’s short-term external debt based on original maturity and 5.3 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.

The BSP now expects a BOP deficit of $4.3 billion instead of a smaller surplus of $700 million for this year. It is also now expecting a smaller GIR level of $108 billion instead of a record high of $112 billion.