BOP surplus widens to $3.2 billion in 10 months

MANILA, Philippines — The Philippines posted a balance of payments (BOP) surplus of $3.2 billion from January to October amid rising remittances from overseas Filipino workers (OFWs), narrowing trade deficit and higher foreign borrowings by the national government, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data released by the BSP showed that the latest figure was a reversal of the $7.12-billion deficit incurred in the same period last year.

“Based on preliminary data, this development reflected mainly the improvement in the balance of trade alongside the higher net inflows from personal remittances, trade in services, and foreign borrowings by the national government,” the BSP said.

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

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit from January to September narrowed by 14.7 percent to $39.82 billion compared to last year’s $46.69 billion.

During the nine-month period, exports contracted by 6.5 percent to $54.54 billion from $58.37 billion, while imports declined by 10.2 percent to $94.36 billion from $105.06 billion.

Likewise, personal remittances grew by 2.8 percent to $27.24 billion from January to September versus last year’s $23.82 billion, of which cash remittances coursed through banks rose by 2.8 percent to $24.49 billion from $23.82 billion.

The BSP also said the net inflows from foreign direct investments (FDIs) contributed to the surplus, although lower during the period.

For October alone, the country’s BOP surplus more than doubled to $1.51 billion from $711 million in the same month last year.

“The BOP surplus in October 2023 reflected inflows arising mainly from the national government’s net foreign currency deposits with the BSP, and the BSP’s net foreign exchange operations and net income from its investments abroad,” the central bank said.

Meanwhile, the BSP said the country’s gross international reserves level increased to a nine-month high of $101 billion in October from $98.1 billion in September. This was the highest since the $3.08-billion GIR surplus recorded in January.

The level represents a more than adequate external liquidity buffer equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income. It is also about 5.8 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.

The buffer ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service in extreme conditions when there are no export earnings or foreign loans.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the proceeds of the national government’s Retail Dollar Bonds (RDBs) amounting to $1.26 billion in October partly led to the latest increase in the BOP and in the GIR.

“For the coming months, the BOP data could still be supported by the continued growth in the country’s structural dollar inflows, such as OFW remittances, business process outsourcing revenues, foreign investments/FDIs, exports, foreign tourism receipts as well as the relatively narrower trade deficit,” he said.

He said the national government’s planned debut of Islamic or sukuk bonds, as early as the latter part of 2023, and eurobonds in 2024 would also be added to the country’s BOP and GIR in the latter part of this year.

For 2023, the BSP further lowered its BOP deficit projection to $100 million. It is expected to reverse to a $1-billion surplus from a deficit of $500 million in 2024.

On the other hand, the central bank sees the GIR level falling below $100 billion at $99.5 billion this year before rising to $102 billion next year.