MANILA, Philippines — The country’s balance of payments (BOP) deficit swelled to the highest level in four years in September due to the continued weakening of the peso, as well as the record high trade shortfall amid the persistent surge in global commodity prices, according to the Bangko Sentral ng Pilipinas.
BSP data showed the Philippines recorded a BOP shortfall for the sixth straight month at $2.34 billion in September, 5.7 times the $412-million deficit recorded in the same month last year.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said last month’s BOP shortfall was the biggest since the $2.69-billion deficit recorded in September 2018.
“The BOP deficit in September 2022 reflected outflows arising mainly from the BSP’s net foreign exchange operations and 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 that 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.
With the huge shortfalls in the past six months, the country’s cumulative BOP deficit reached $7.83 billion from January to September, almost 12 times the $665-million shortfall recorded in the same period last year.
“Based on preliminary data, the cumulative BOP deficit reflected the widening trade in goods deficit, as goods imports continued to surpass goods exports on the back of the persistent surge in international commodity prices and resumption in domestic economic activities,” the BSP said.
Latest data from the Philippine Statistics Authority (PSA) showed that the country recorded an all-time-high record trade deficit of $6 billion in August, 81.3 percent wider than the $3.31-billion shortfall recorded in the same month last year.
Exports slipped by almost two percent to $6.41 billion from $6.54 billion, while imports jumped by 26 percent to $12.41 billion from $9.85 billion.
This translated to a 68.8-percent surge in the trade deficit to $41.81 billion in the first eight months from $24.77 billion in the same period last year.
From January to August, exports rose by 4.4 percent to $51.15 billion from last year’s $49 billion, while imports increased by 26 percent to $92.97 billion from $73.77 billion.
The BSP said the country’s foreign exchange buffer stayed below $100 billion as it further declined to a two-year low of $93 billion in end-September from $97.4 billion as of end-August as the peso continues to hit record low levels amid the strong dollar as the hawkish US Fed has signaled more rate hikes to tame inflation.
According to the BSP, the buffer represents a more than adequate external liquidity buffer equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income.
The GIR level is also about 6.6 times the country’s short-term external debt based on original maturity and four times based on residual maturity.
Earlier, the Monetary Board further raised its BOP deficit forecast to $8.4 billion or two percent of gross domestic product (GDP) for this.
It also lowered its GIR projections to $99 billion for this year and to $100 billion for 2023.