Philippines incurs $167 million BOP deficit in July

MANILA, Philippines — The country’s balance of payments (BOP) reverted to a deficit amounting to $167 million in July from a $62-million surplus in the same month last year, as the national government paid more foreign obligations.

“The BOP deficit reflected the national government’s drawdowns on its foreign currency deposits with the Bangko Sentral ng Pilipinas (BSP) to service external debt obligations,” the central bank said in a statement.

The BOP provides a snapshot of the country’s international transactions and is a key barometer of economic resilience. A deficit indicates that more dollars left the country than came in during the period.

The country’s BOP also stood at a deficit of $5.76 billion from January to July, a reversal from the $1.5-billion surplus in the same period a year ago. This year-to-date figure is the largest in two months or since May’s $5.82 billion deficit.

“The year-to-date BOP deficit was largely due to the continued trade in goods deficit,” the BSP said.

Based on the preliminary data from the Philippine Statistics Authority, the country’s trade deficit went down to $24 billion in the first semester from the $25.1 billion deficit posted a year ago.

“The (deficit was) partly offset by the sustained net inflows from personal remittances from overseas Filipinos, foreign borrowings by the national government and foreign portfolio investments,” the BSP said.

The BOP position mirrored the decrease in the gross international reserves (GIR), which declined to $105.4 billion as of end-July from $106 billion a month ago.

The level of GIR remains an adequate external liquidity buffer, equivalent to 7.2 months’ worth of imports of goods and payments of services and primary income. It also covers about 3.4 times the country’s short-term external debt based on residual maturity.

Dollar reserves are made up of foreign-denominated securities, foreign exchange, and other assets including gold. Gross international reserves help a country finance its imports and foreign debt obligations, stabilize its currency and provide a buffer against external economic shocks.

The BSP expects the BOP position to hit a shortfall of $6.3 billion or -1.4 percent of gross domestic product this year.