BOP shortfall narrows to $196 million in February

MANILA, Philippines — The Philippines registered a balance of payments (BOP) shortfall of $196 million in February, its second straight month of deficit, as the government settled more foreign debt obligations last month, the Bangko Sentral ng Pilipinas (BSP) said. Data released by the central bank showed the BOP deficit narrowed by 78.1 percent from the $895 million deficit recorded in February 2023. It was also 73.5-percent smaller than the $740 million gap recorded in January.

“The BOP deficit in February reflected outflows arising mainly from the national government’s payments of its foreign currency debt obligations,” the BSP said in a statement.

The cumulative BOP position remained at a shortfall of $936 million in the first two months of the year, reversing the $2.19 billion surplus in the same period a year ago.

“Based on preliminary data, this cumulative BOP deficit reflected mainly the continued trade in goods deficit coupled with the national government’s net repayments of its foreign loans,” the central bank said.

The country’s BOP position reflected a lower gross international reserve (GIR) level of $102 billion as of end-February from $103.3 billion as of end-January. It represents an external liquidity buffer of 7.5 months’ worth of imports of goods and payments of services and primary income.

The GIR is also about six times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.

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

A deficit means more dollars flowed out of the country to pay for the importation of more goods, services and capital than what flowed in from exports, remittances from overseas Filipino workers, business process outsourcing earnings and tourism receipts.

“Improvement can be traced to the likely narrowing of the trade deficit in 2024 with the first quarter of 2023 seeing sizable trade deficits,” ING Bank Manila senior economist Nicholas Mapa said.

Based on the latest data from the Philippine Statistics Authority, the Philippines posted a trade deficit of $4.22 billion in January, 24 percent lower than the $5.56 billion shortfall recorded in January 2023.

“BOP direction will depend largely on the current account trends as well as potential foreign direct investment flows, following the sustained increase in the investment pledges collected by the administration,” Mapa said.

The Philippines booked a $3.67-billion BOP surplus in 2023, a turnaround from the all-time-high deficit of $7.26 billion in 2022, amid higher inflows from trade in services, remittances from overseas Filipino workers and foreign borrowings by the national government.

The surplus was more than three times the BSP’s projection of $1.1 billion, or 0.2 percent of gross domestic product (GDP) projected by the central bank for 2022.

For this year, the BSP is now looking at a smaller BOP deficit at $700 million or 0.1 percent of GDP. It is expected to reverse to a $500-million deficit next year, equivalent to -0.1 percent of GDP.