Philippines' dollar position reverts to a deficit in November

MANILA, Philippines — Foreign currency withdrawals of the national government to pay off old debts and various expenses sent the country’s external position back into a dollar deficit in November.

What’s new

The country's balance of payments (BOP) posted a $123 million deficit in November, reversing a $1.1 billion surplus recorded in October, the Bangko Sentral ng Pilipinas reported Monday. The gap was also a turnaround from $1.47 billion surplus recorded a year ago.

In the first 11 months, the BOP position registered a surplus of $353 million.

Why this matters

The BOP is a summary of the economic transactions of a country with the rest of the world for a specific period. A BOP surplus happens when foreign fund inflows exceed outflows while a deficit occurs when the reverse takes place.

For this year, the BSP downwardly revised its forecast for the BOP position to a $1.6 billion surplus which, if realized, would be significantly lower than $16 billion surfeit recorded in 2020, as easing pandemic restrictions boost demand for dollars to pay for imports of goods and services needed to sustain a fragile economic recovery.

What the BSP says

The BSP said the deficit in November came from the national government’s foreign currency withdrawals from the central bank to settle foreign currency debt obligations and to finance various expenditures.

What an analyst says

Sought for comment, Jun Neri, lead economist at Bank of the Philippine Islandsm expects a current account deficit of about 2.5% of the country's gross domestic product next year, with a BOP deficit of about 2.8%.

"This will be largely driven by an import surge toward a new record high (Nearly $130 billion), outweighing the sustained growth in exports, remittances and BPO earnings. The outcome of the elections can have the biggest influence on the swing toward wider or narrower C/A and BoP deficits," Neri said in a Viber message.

Other figures

• The central bank reported that the BOP deficit reduced the country’s dollar reserves to $107.72 billion as of November, which was nevertheless sufficient to cover 10.2 months’ worth of payments of services and import requirements.