January BoP deficit hits 16-month high
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Thu, 20 Feb 2020 17:33:06 +0000
THE Philippines’ balance of payments (BoP) reverted to a 16-month high deficit of $1.35 billion in the first month of the year, which the Bangko Sentral ng Pilipinas (BSP) attributed to foreign currency withdrawals.
Central bank data showed that the amount was a turnaround of the $2.70-billion and $1.57-billion surplus recorded in January and December 2019, respectively.
The shortfall was the largest since September 2018, when the payments position stood at a deficit of $2.69 billion.
In a statement on Wednesday night, the Bangko Sentral said the January deficit “reflected mainly the outflows arising from the national government’s foreign currency withdrawals, which were used largely to pay its foreign currency debt obligations, as well as net outflows in foreign portfolio investments.”
These were partly offset by “inflows representing the BSP’s net foreign-exchange operations and income from its investments abroad during the month in review,” it added.
Commenting on the newest data, Security Bank Corp. Assistant Vice President and economist Robert Dan Roces projects this year’s BoP surplus to be smaller than the seven-year-high $7.84-billion surplus in 2019 and the $3-billion forecast of the Bangko Sentral this year.
He said imports were expected to swell this year on the back of infrastructure spending, which could lead to a renewed widening of the trade deficit, since exports are also projected to contract after posting growth in 2019.
With the continued monetary policy easing of the Bangko Sentral, Roces added financial flows may be hard pressed to replicate their 2019 performance, thus a smaller financial account surplus and a wider current account deficit.
“These should exert pressure on the BoP, which we expect to be substantially smaller for the year compared [to] last year’s, and probably in the $3-billion-surplus territory,” he said.
The central bank also said the payments balance position last month reflected the final gross international reserves (GIR) level of $86.87 billion as of end-January 2020.
“This GIR level represents ample liquidity buffer equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income,” it added.
It is also equivalent to 5.4 times the country’s short-term external debt based on original maturity and four times based on residual maturity, the BSP said.