BOP swings to deficit in August

MANILA, Philippines - The country’s balance of payments (BOP) position reverted to a deficit in August due to the volatility in the financial markets brought about by the devaluation of the Chinese yuan and the global stock market rout, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The BOP deficit stood at $450 million in August, a complete reversal of the $114 million surplus registered in the same month last year.

This was the biggest deficit since January 2014 when the Philippines incurred a deficit of $4.48 billion after the US Federal Reserve started wrapping up its quantitative easing measures aimed at boosting its economy.

More foreign portfolio investments or ‘hot money’ were pulled out of the Philippines after a global stock market rout late last month prompting investors to cash in on their profits.

Foreign portfolio investments yielded a net outflow of $542.52 million in August, a sharp turnaround from the net inflow of $483.45 million in the same period last year.

Inflows of hot money into the Philippines fell 46 percent to $1.11 billion in August from $2.07 billion in the same month last year, while outflows inched up 4.7 percent to $1.66 billion from $1.58 billion.

Foreign portfolio investments are also known as hot money since these are speculative capital flows that move very quickly in and out of markets.

The PSE index was dragged down by a global stock market rout last Aug. 24 as it booked its 11th biggest recorded drop of 6.7 percent to close at 6,791.01.

The BOP shows a summary of a country’s transactions with the rest of the world. Components include trade, foreign direct and portfolio investments, and even remittances from Filipinos abroad.

A surplus means more money went into the economy, while a deficit means otherwise.

Despite the deficit in August, the country’s BOP position booked a surplus of $1.59 billion in the first eight months compared to a deficit of $3.53 billion last year.

Data also showed foreign direct investments (FDIs) plunged 40 percent to $2.02 billion in the first half from $3.37 billion a year ago.

On the other hand, the amount of cash sent home by Filipinos living and working abroad grew 4.8 percent to $14.16 billion from January to July compared to $13.51 billion in the same period last year.