BOP deteriorates to $3 billion gap in Q1

MANILA, Philippines —   The Philippines swung to a balance of payments (BOP) deficit in March as the government tapped its dollar reserves to settle foreign debt, the Bangko Sentral ng Pilipinas said yesterday.

Based on BSP data, the country’s BOP position recorded a $2 billion shortfall in March, a reversal from the $1.17 billion surplus posted in the same month last year.

The BOP summarizes the country’s transactions with the rest of the world. A deficit indicates that more dollars left the economy than entered, putting pressure on the peso and official reserves.

The March deficit brought the year-to-date BOP gap to $2.96 billion, a turnaround from the $238 million surplus recorded in the first quarter of 2024.

“The BOP deficit reflected the national government’s drawdowns on its foreign currency deposits with the BSP to meet its external debt obligations, as well as the BSP’s net foreign exchange operations,” the BSP said.

The data showed that the cumulative BOP deficit mirrored a widening trade gap, with preliminary figures from the Philippine Statistics Authority showing the trade deficit rising to $8.3 billion in January to February from $7.9 billion a year earlier.

The central bank noted, however, that continued net inflows from personal remittances, foreign direct investments and government foreign borrowings helped cushion the impact of the trade gap on the overall external payments position.

John Paolo Rivera, senior research fellow at the Philippine Institute for Development Studies, said the shift to a BOP deficit in March reflects a reversal from the strong surplus of $3.09 billion in February.

“The BOP deficit may be driven by several factors, including a wider trade deficit due to increased imports, larger debt service payments or foreign exchange operations by the BSP to manage peso volatility,” he said.

Rivera also said that earlier inflows such as borrowings, remittances or investment-related receipts moderated in March.

This underscores the sensitivity of the country’s external position to global market movements and domestic financing needs.

“Moving forward, careful management of external debt and trade competitiveness will be crucial to maintaining external stability,” Rivera said.

Meanwhile, the country’s gross international reserves (GIR) declined to $106.7 billion as of end-March from $107.4 billion in February.

Despite the drop, the BSP said the current GIR level remains adequate.

This level of reserves is enough to cover 7.4 months’ worth of imports and payments of services and primary income, and is 3.6 times the country’s short-term external debt based on residual maturity.

The BSP expects the BOP position to hit a deficit of $4 billion this year.