BOP surplus stays above $3 billion

MANILA, Philippines — The country’s overall balance of payments (BOP) surplus stayed above $3 billion from January to November   despite posting a deficit last month, according to the Bangko Sentral ng Pilipinas (BSP).

Preliminary data from the central bank showed that the $3.03-billion surplus during the 11-month period reversed the $7.87-billion deficit recorded 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 overseas Filipino workers (OFWs), business process outsourcing (BPO) earnings and tourism receipts than what flowed out to pay for the importation of more goods, services and capital.

OFW remittances rose by 2.8 percent from January to September, slightly lower than the three-percent target set by the BSP.

Personal remittances reached $27.24 billion during the 11-month period from a year-ago level of $26.49 billion. Of the amount, cash remittances coursed through banks amounted to $24.49 billion during the 11-month period from $23.82 billion a year ago.

The increase was also traced to the higher foreign borrowings by the national government after it recently raised $1.26 billion from the second retail dollar bond sale.

Latest data from the Philippine Statistics Authority (PSA) showed the country’s trade deficit from January to October  narrowed by 11.9 percent to $44.07 billion compared to last year’s $50 billion.

Imports contracted by 9.6 percent to $104.97 billion during the first 10 months  from $116.03 billion a year earlier, while exports declined by 7.8 percent to $60.91 billion from $66.08 billion.

Furthermore, the BSP said that net inflows from foreign direct investments (FDI) contributed to the surplus, although lower during the covered period.

Net FDI inflow fell by 15.9 percent to $5.88 billion from January to September compared to last year’s $6.99 billion amid persistent global economic uncertainties and elevated inflation.

For November alone, the country’s BOP recorded a deficit of $216 million, 72 percent lower than the $756-million shortfall booked in the same month last year.

Aside from OFW remittances and narrower trade deficit, Rizal Commercial Banking Corp. chief economist Michael Ricafort cited the proceeds of the national government’s foreign currency-denominated borrowings, both from commercial and multilateral sources, since the start of the year.

Ricafort said the BOP data could improve in December after the national government raised $1 billion from the maiden issuance of sukuk or Islamic bonds.

“For the coming months, BOP data could still be supported by the continued growth in the country’s structural   dollar inflows such as OFW remittances, BPO revenues, FDIs, exports, foreign tourism receipts, as well as the relatively narrower trade deficit amid the still net decline in the world prices of crude oil and other global commodities imported by the country,” he said.

The BSP said the country’s gross international reserves (GIR)  or foreign exchange buffer increased to $102.7 billion in November from $101 billion in October, and is equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income and about six times the country’s short-term external debt.

The BSP is looking at a stronger external payments position this year as it raised its BOP surplus target to $1.1 billion from $100 million this year, reversing last year’s deficit of $7.3 billion.

For 2024, it lowered its BOP surplus projection to only $400 million from $1 billion due to key downside risks to the country’s external position, namely: subdued global demand conditions, weak trade and investment prospects, lingering high interest rate environment, elevated inflation, and the escalation of geopolitical tensions in various parts of the world.