Higher dollar outflow widens balance of payments gap in first quarter

MANILA, Philippines — More dollars continued to flow out of the Philippines as the country’s balance of payments (BOP) position exceeded the full-year deficit target set by the Bangko Sentral ng Pilipinas (BSP) in the first quarter.

The country incurred a BOP deficit of $1.23 billion from January to March, 23.4 percent wider than the $994 million shortfall recorded in the same period last year, according to the central bank.

The amount has exceeded the BOP deficit target set by the BSP for this year. The central bank expects the country to incur a BOP deficit of $1 billion as it sees more foreign exchange exiting the economy.

“The higher cumulative BOP deficit for the first quarter may be attributed partly to the widening merchandise deficit for the first two months,” the BSP said in a statement.

The Philippine Statistics Authority (PSA) has reported a 31.9 percent widening in the country’s trade deficit in the first two months as imports jumped 14.7 percent to $16.26 billion, while exports inched up by a paltry one percent to $10.03 billion.

The BOP is the difference in total values between payments into and out of a country over a period. A deficit means more foreign exchange flows out of the country to pay for the importation of more goods, services, and capital than what flows in from exports.

“We continue to expect the overall BOP position for the year to be very manageable,” the central bank said.

The Philippines has been recording a shortfall in its BOP position in the first three months.

For March alone, a BOP deficit of $266 million was recorded, lower than the $429 million shortfall in February and the $550 million deficit registered in the same month last year.

“Outflows in March stemmed mainly from foreign exchange operations of the BSP and payments made by the national government for its maturing foreign exchange obligations,” it said.

The strong outflows, the central bank explained, was cushioned by net foreign currency deposits of the national government and income from the BSP’s investments abroad.

The country recorded a BOP deficit of $863 million last year, lower than the revised $1.04 billion shortfall in 2016, reflecting the reclassification of renminbi-denominated assets to reserve assets.

A declining BOP position may result in the thinning of the country’s foreign exchange buffer that serves as protection against external shocks.

The BSP said the BOP position is consistent with the gross international reserve (GIR) level of $80.51 billion in end-March, equivalent to 7.9 months’ worth of imports of goods and payments of services.