BOP reverts to surplus in September

MANILA, Philippines - The country’s balance of payments (BOP) position reverted to a surplus in September due to higher inflows from the central bank’s foreign exchange operations and robust earnings from national government deposits, data from the Bangko Sentral ng Pilipinas (BSP) showed.

BSP Governor Amando Tetangco Jr. said the BOP position swung to a surplus of $219 million in September from a deficit of $450 million in August.

“The BOP reverted to a surplus in the month of September, as inflows from BSP’s foreign exchange operations, income from abroad and deposits of the national government more than covered the payments for government’s foreign exchange obligations,” he said in a text message to reporters.

The BOP shows a summary of a country’s transactions with the rest of the world. Its 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 more money left.

The BOP deficit in August was the largest since January 2014 when the gap amounted to $4.48 billion.

The surplus in September brought the country’s BOP position to a surplus of $1.81 billion in the first nine months of the year, a complete reversal of the $3.43 billion deficit in the same period last year.

The BSP sees the country’s BOP position to hit a surplus of $2 billion this year from a deficit of $2.86 billion last year after the US Federal Reserve started wrapping up its quantitative easing measures aimed at boosting the US economy.

“This brought cumulative surplus to $1.81 billion, making us poised to achieve our full-year projection of $2 billion,” Tetangco said.

The Philippines managed a healthy BOP position from January to September this year amid volatilities in the financial markets brought about by the impending interest rate lift-off in the US as well as the economic slowdown in China.

The deficit in August reflected the decision of the People’s Bank of China to devalue the Chinese yuan last Aug. 11 and the massive sell off in the global stock market last Aug. 24.

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

However, less foreign portfolio investments were pulled out from the Philippines last September. Data showed foreign portfolio investments yielded a net outflow of $324 million in September, an improvement from the $543 million outflows recorded in August.

Foreign portfolio investments - also known as ‘hot money’ since these are speculative capital flows that move very quickly in and out of markets - yielded a lower net outflow of $413.93 million in the first nine months of the year from a net outflow of $853.65 million.

Tetangco said a BOP surplus bodes well for the stability in the market.

“The healthy BOP figure augurs well for stability in the foreign exchange market,” the BSP chief added.