BOP gap swells to over 2-year high

MANILA, Philippines — The country’s balance of payments (BOP) deficit swelled to the highest level in over two years in November as the national government paid its external debt, according to the Bangko Sentral ng Pilipinas.

BSP data showed that the country recorded a BOP shortfall for the second straight month at $2.28 billion in November, 10.5 times higher than the $216-million deficit recorded in the same month last year.

The BOP gap marked the biggest in 26 months or since the $2.34-billion deficit recorded in September 2022.

“The BOP deficit in November reflected the national government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures, and the BSP’s net foreign exchange operations,” the central bank said.

The BOP is the difference in total values between payments into and out of the country over a period. A deficit means that more dollars flowed out to pay for the importation of more goods, services and capital than what came in from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing (BPO) earnings and tourism receipts.

With the huge shortfalls in the past two months, the country’s cumulative BOP reached a surplus of $2.12 billion from January to November, 30 percent lower than the $3.03-billion excess recorded in the same period last year.

“The decline in the cumulative BOP surplus was due to lower net receipts from trade in services and net foreign borrowings by the national government,” the BSP said.

Latest data from the central bank showed that net receipts from trade in services accounts fell by 36 percent to $3.3 billion in the third quarter from $5.3 billion a year ago.

From January to September, net receipts from trade in services decreased by 24 percent to $10.4 billion from $13.7 billion a year prior.

“However, this decline was partly muted by the continued net inflows from personal remittances as well as net foreign portfolio and direct investments,” the central bank said.

Personal remittances rose by 2.7 percent to $3.42 billion in October from $3.33 billion in the same month last year, marking the highest since the $3.43 billion recorded in July. From January to October, personal remittances increased by three percent to $31.49 billion.

The November BOP position also reflects a decrease in the final gross international reserves (GIR) level, to $108.5 billion from $111.1 billion as of end-October.

According to the BSP, the GIR represents a more than adequate external liquidity buffer equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income.

The GIR level is also about 4.3 times the country’s short-term external debt based on residual maturity.

The BSP expects the BOP position to hit a surplus of $2.3 billion (0.5 percent of gross domestic product) for this year and $1.7 billion (0.3 percent of GDP) in 2025.