Philippine posts BOP surplus of $2.87 billion

MANILA, Philippines — The Philippines managed to book a balance of payments (BOP) surplus of $2.87 billion in the first five months, reversing the $1.53 billion deficit recorded in the same period last year despite recording shortfalls for two straight months, according to the Bangko Sentral ng Pilipinas (BSP).

The BSP partly attributed the five-month BOP surplus to net inflows from personal remittances of overseas Filipino workers (OFWs), net foreign borrowings by the national government, trade in services as well as foreign direct investments (FDI).

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 into the country from exports, OFW remittances, business process outsourcing (BPO) earnings and tourism receipts than what flowed out to pay for the importation of more goods, services and capital.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), also traced the surplus to the proceeds of the national government’s foreign currency-denominated borrowings from both commercial sources through global bond issuance and from official development assistance (ODA) and other multilateral sources.

In January, the government tapped the international debt market for the second time since President Marcos assumed office in June last year.

The Philippines issued $3 billion worth of global bonds payable in 5.5, 10.5 and 25 years despite rising global interest rates.

Likewise, personal remittances from OFWs grew by 3.2 percent to $11.68 billion in the first four months from $11.32 billion in the same period last year. Of the amount, cash remittances coursed through banks also increased by 3.2 percent to $10.49 billion from $10.19 billion.

On the other hand, the net inflow of FDI declined by 19.6 percent to $2.04 billion in the first quarter rom $2.54 billion in the same quarter last year amid investor concerns over subdued global growth prospects.

For May alone, the central bank said the country incurred a BOP deficit of $439 million, a notable drop from the $1.61 billion shortfall recorded in the same month last year.

According to the BSP, the deficit in May reflected outflows arising mainly from the national government’s net foreign currency withdrawals from its deposits with the BSP to settle foreign currency debt obligations and pay for various expenditures.

For the coming months, Ricafort said the BOP data could still be supported by the continued growth in the country’s structural   dollar inflows such as OFW remittances, BPO revenues, FDI, exports and foreign tourism receipts, among others.

Ricafort said the further narrowing of the Philippines’ trade deficit amid the recent decline in the world prices of crude oil and other global commodities imported by the country would boost the BOP data.

The economist also cited the proposed $2 billion dollar-denominated retail bonds with a tenor of at least five years to be offered by the national government in the third quarter.

The Philippines incurred an all-time high $7.26 billion BOP deficit last year, reversing the $1.35 billion surplus in 2021, as elevated global commodity prices brought about by geopolitical tensions further widened the gap between imports and exports.

For 2023, the BSP lowered its BOP deficit projection to $1.2 billion or 0.3 percent of gross domestic product from $1.6 billion or 0.4 percent of GDP. It is expected to further narrow to $500 million or 0.1 percent of GDP in 2024.

On the other hand, the central bank sees the GIR level hitting $100 billion this year and $102 billion next year.