BOP turns in $2.3 billion surplus in 6 months

MANILA, Philippines —  The country’s balance of payments (BOP) reverted to a surplus of $2.3 billion in the first semester of the year on the back of global bond issuance and growth of various dollar inflows into the Philippines.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that the January to June BOP recorded a surplus of $2.26 billion, a turnaround from the $3.1 billion deficit in the same period last year.

The surplus was booked despite the BOP recording a deficit in four out of the six months of the first half of this year.

In June alone, the BOP deficit reached $606 million, but this was significantly lower than the $1.6 billion shortfall in June last year.

According to the BSP, the first semester BOP surplus is a reflection of inflows that stemmed mainly from personal remittances, net foreign borrowings by the government, trade in services, and foreign direct investments.

The BOP is the difference in total values between payments into and out of the country over a period of time.

A surplus means that more dollars flowed into the country from exports, OFW remittances, business process outsourcing 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., said the surplus could also be attributed to the narrowing trend in trade deficit as global oil and commodity prices decline,  reducing the country’s total import bill.

“These were partly offset by some net payment of foreign debts as well as payment of various expenditures denominated in US dollars and other foreign currencies,” he said.

Moving forward, Ricafort said the BOP data could still improve with the continued growth in the country’s structural inflows as the economy reopens further.

He noted that the proposed $2 billion retail dollar bonds to be issued in September, as well as the  $1 billion Islamic bonds later this year, would be added to the country’s BOP and gross international reserves (GIR).

Further, the BSP reported that the country’s GIR level decreased to $99.4 billion as of end-June from $100.6 billion the month before.

The central bank maintained that the foreign exchange buffer represents a more than adequate external liquidity buffer equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income.It is also about 5.7 times the country’s short-term external debt based on original maturity and four times based on residual maturity.

This year, the BSP slashed its BOP deficit projection to $1.2 billion, which is equivalent to 0.3 percent of the overall economy.

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