Balance of payments swings to deficit in Oct.

The country posted posted a balance of payments (BoP) deficit of USD 724 million in October as the government repaid external debt, the Bangko Sentral ng Pilipinas (BSP) said.

This was a reversal of the USD 1.51-billion surplus a year ago and USD 3.526-billion surfeit in September.

“The BoP deficit in October 2024 reflected the National Government’s (NG) net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said in a statement.

The BoP summarizes the country’s transactions with the rest of the world. A deficit means more funds left the country, while a surplus shows that more money came in.

Latest data from the Bureau of the Treasury (BTr) showed that the NG’s outstanding debt rose to a record-high PHP 15.89 trillion as of end-September.

The bulk (68.81%) of the debt stock came from domestic sources while the remainder was from foreign creditors.

External debt rose by 9.3% to PHP 4.96 trillion at end-September from a year ago.

Central bank data showed the BoP reflected a final gross international reserve (GIR) level of USD 111.1 billion as of end-October, down from USD 112.7 billion a month earlier.

Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that despite the decline, the reserve level has been above the USD 100-billion mark for over a year or 13 straight months.

“Still a relatively high GIR, the second highest on record, partly due to net income from the BSP’s foreign investments amid gains in most global financial markets recently on market expectations on the series of Fed rate cuts from 2024-2026,” he added.

The US Federal Reserve began its rate-cutting cycle in September with a half-percentage-point reduction and delivered another quarter of a percentage-point cut earlier this month.

Markets are anticipating another quarter-point rate cut at its last meeting for the year in December.

Data from the central bank showed the dollar buffer was enough to cover 4.4 times the country’s short-term external debt based on residual maturity.

It was also equivalent to eight months’ worth of imports of goods and payments of services and primary income.

An ample level of foreign exchange buffers safeguards an economy from market volatility and is an assurance of the country’s capability to pay debts in the event of an economic downturn.

Mr. Ricafort said the deficit position in October was due to the country’s continued trade deficit.

The Philippines’ trade-in-goods balance stood at a USD 5.09-billion deficit in September, the widest in 20 months.

The country’s balance of trade in goods has been in the red for over nine years since the USD 64.95-million surplus recorded in May 2015.

Mr. Ricafort also noted volatility due to geopolitical risks and markets pricing in the incoming Trump administration’s restrictive trade policies.

10-month surplus

Meanwhile, the country’s BoP position registered a USD 4.393-billion surplus in the 10-month period, widening from the USD 3.246-billion surplus a year ago.

“The surplus reflected in part the continued net inflows from personal remittances, trade in services, and net foreign borrowings by the NG,” the central bank said.

“Furthermore, net foreign direct and portfolio investments contributed to the BoP surplus,” it added.

Latest data from the BSP showed foreign direct investment (FDI) net inflows rose by 3.9% year on year to USD 6.07 billion in the first eight months.

Meanwhile, foreign portfolio investments yielded a net inflow of USD 3.02 billion in the January-September period, significantly higher than the USD 387.24-million inflow last year.

“For the coming months, the BoP data could improve, thereby could also lead to better GIR, partly due to the proceeds of the National Government’s foreign currency-denominated borrowings from both commercial sources that would also be added to the country’s BoP and GIR,” Mr. Ricafort said.

He also noted continued growth in overseas Filipino worker remittances, business process outsourcing  revenues, exports and foreign tourism receipts.

“Going forward, any improvement in BoP data and in GIR data for the coming months could still help provide a greater cushion for the peso exchange rate (against) the US dollar especially versus any speculative attacks, as well as help strengthen the country’s external position,” he added.

The BSP expects a USD 2.3-billion BoP surplus by yearend, equivalent to 0.5% of economic output. – Luisa Maria Jacinta C. Jocson, Reporter