January BoP swings to deficit

The country posted a balance of payments (BoP) deficit of USD 740 million in January — the biggest in 11 months — as the government paid its foreign debt, according to data released by the Bangko Sentral ng Pilipinas (BSP) late Monday.

It was a reversal of the USD 3.08-billion surplus a year ago and USD 642 million in December.

“The BoP deficit in January 2024 reflected outflows arising mainly from the National Government’s (NG) payments of its foreign currency debt obligations,” the central bank 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.

Treasury data showed that the government’s outstanding debt hit a record PHP 14.62 trillion as of end-2023, 8.92% higher than a year earlier. This brought its outstanding debt as a share of gross domestic product (GDP) to 60.2%.

The bulk or 68.5% of the debt portfolio came from domestic sources, while the remaining 31.5% was from foreign creditors. Foreign borrowings jumped by 9.21% to P4.6 trillion from a year ago.

The January BoP deficit also reflected the continued trade gap in recent months, Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said in a note.

The country’s trade-in-goods deficit narrowed by 9% year on year to a USD 52.42-billion deficit in 2023, as exports and imports declined faster than government projections amid slowing demand.

The BoP as of end-January reflects final gross international reserves (GIR) of USD 103.3 billion, 0.5% lower than a month ago.

Despite the decline, the dollar buffer is enough to pay for 7.7 months’ worth of imports of goods and payments of services and primary income, the BSP said.

The reserves can also cover up to six times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.

The country’s BoP position could improve in the coming months due to the proceeds of the government’s dollar-denominated debt from commercial sources, Mr. Ricafort said.

The government plans to borrow PHP 2.4 trillion this year — PHP 1.85 trillion from the domestic market and PHP 606.85 billion from overseas.

A narrower trade deficit could also support the country’s BoP position this year, as global oil prices are still among the lowest in two years, Mr. Ricafort said.

But repayment of the state’s foreign debt could offset the growth in the country’s balance of payments this year, he added.

The BSP expects a USD 400-million payment position gap by yearend, equivalent to 0.1% of economic output. – Keisha B. Ta-asan, Reporter