MANILA, Philippines — The Philippines sank deeper into a dollar deficit in September as foreign currency fluctuations sent the national government’s debt payments into steep territory.
What’s new
The country's balance of payments (BOP) amounted to a deficit of $2.3 billion in September, wider compared with the $412 million deficit a year ago, the Bangko Sentral ng Pilipinas reported on Wednesday.
This was the widest BOP gap recorded this year. The dollar deficit was markedly larger compared to August, when the shortfall stood at $572 million.
Year-to-date, the BOP incurred a $7.8 billion deficit.
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.
For this year, BSP expects imports to grow 18% annually, higher than its old projection of 15% increase.
The BSP raised its projection for the BOP position to hit a $6.3 billion deficit this year, higher compared to the central bank's previous forecast of a $4.3 billion deficit.
In September, the BSP credited the shortfall due to "the BSP’s net foreign exchange operations and the National Government’s payments of its foreign currency debt obligations."
What an analyst says
Nicholas Antonio Mapa, senior economist at ING Bank in Manila, noted this deficit trend is expected to persist in the coming months.
"This was to be expected as the country now runs a sizable trade deficit. Dollar outflows (BoP) deficit suggest pressure on the PHP in the near term but the silver lining is that the BSP has a sizable stash of foreign currency reserves worth $95 billion," he said in an emailed commentary.
A BOP deficit also means a weaker currency, which could further bloat import costs.
"Current account deficit traced to the record high trade deficit while financial account outflows tied to foreign investors exiting given heightened risk off tone," Mapa added.
Other figures
The country's dollar reserves were pared to $93 billion as of end-September. The level represents a buffer equivalent to 7.4 months worth of imports of goods and services. It's about 6.6 times the country’s short-term external debt based on original maturity and 4.0 times based on residual maturity.