Philippine dollar deficit shrinks in June — BSP

MANILA, Philippines — The Philippines posted another month of dollar deficit in June, albeit narrower as earnings from the central bank’s investments overseas offset hefty withdrawals by the national government to pay for its old foreign debts.

What’s new

The country’s balance of payments (BOP) posted a deficit of $312 million in June, a turnaround from $80 million surplus a year ago, the Bangko Sentral ng Pilipinas reported Tuesday.

However, the dollar deficit was narrower compared to May, when the shortfall stood at $1.39 billion.

Why this matters

The BOP is a summary of the country’s transactions with the world for a specific period of time. A deficit happens when foreign fund outflows exceed inflows.

Last year, the Philippines enjoyed months of BOP surplus, but it was mainly a reflection of a weak economy after the pandemic sapped a robust domestic demand that used to drive dollar outflows.

But as pandemic restrictions ease, the BSP now expects the surplus to narrow for the good reason that local demand is finally picking up, which boosts demand for dollars especially among importers. For this year, the BOP surplus is forecast to reach $7.1 billion, smaller than $16 billion surfeit in 2020.

In the first half of the year, the BOP position registered a deficit of $1.94 billion.

What the BSP says

In its report, the central bank said last month’s deficit was due to “outflows arising from the foreign currency withdrawals of the National Government (NG) from its deposits with the BSP as the NG settled its foreign currency debt obligations and paid for various expenditures, and the BSP’s net foreign exchange operations.”

“These were partly offset, however, by the inflows from the BSP’s income from its investments abroad,” the BSP added.

What an analyst say

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said in an e-mailed commentary: “For the coming months, BOP could still be supported by the continued inflows of OFW remittances, BPO revenues, foreign investments, and other structural US dollar inflows amid optimism on increased COVID-19 vaccine arrivals.”

Other figures

• The BSP said the dollar deficit brought the country’s gross international reserves to $105.76 billion as of end-June. The amount provides enough buffers for the economy amid hard times, and can cover 12 months’ worth of imports.