July BoP position swings to surplus

The country’s balance of payments (BoP) position swung to a surplus in July, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The USD 62-million surplus was a turnaround from the USD 53-million deficit a year ago and the USD 155-million deficit in June. 

“The BoP surplus in July 2024 reflected inflows mainly from the net income from the BSP investments abroad and the National Government’s (NG) net foreign currency deposits with the BSP,” the central bank said in a statement.

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

At its end-July position, the BoP reflected a final gross international reserve (GIR) level of USD 106.7 billion, slightly higher than USD 105.2 billion as of end-June.

The dollar reserves were enough to cover 6.1 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.

It was also equivalent to 7.9 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.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the BoP surplus in July was due to “continued inflows of overseas Filipino worker  remittances, business process outsourcing revenues, foreign tourism receipts, foreign direct investments (FDI) and other structural US dollar inflows of the country.”

Earlier data from the BSP showed that cash remittances grew by 2.5% to a six-month high of USD 2.88 billion in June. This brought the January-to-June remittances to USD 16.25 billion, up 2.9% from a year ago.

Net inflows of FDIs climbed by 15.8% to USD 4.024 billion in the first five months from USD 3.475 billion in the year-ago period.

7-MONTH PERIOD
Meanwhile, the country’s BoP position registered a USD 1.504-billion surplus in the January-to-July period. This was lower than the USD 2.207-billion surplus recorded a year ago.

“Based on preliminary data, this cumulative BoP surplus reflected mainly the narrowing trade in goods deficit alongside the continued net inflows from personal remittances, net foreign direct investment, trade in services, net foreign borrowings by the NG, and net foreign portfolio investments,” the BSP said.

In the first half of the year, the trade deficit narrowed by 9.5% to USD 25 billion. The country’s balance of trade in goods has been in a deficit for nine years or since the USD 64.95-million surplus in May 2015.

Mr. Ricafort said the BoP position in the January-July period was lower than a year ago due to the bigger proceeds from global bond sales last year.

The government raised USD 3 billion from its dollar bond sale in January 2023. This year, it raised USD 2 billion from its dual-tranche dollar bond offering in May.

“While the year-to-date surplus is lower than 2023, the country’s GIR of USD 106.7 billion remains ample,” Security Bank Corp. Chief Economist Robert Dan J. Roces said in a Viber message.

“A narrowing trade deficit and consistent inflows from remittances, FDI and portfolio investments contribute to a cautiously optimistic outlook for the Philippine economy,” he added.

For the coming months, Mr. Ricafort said the BoP position could further improve amid the expected foreign bond offerings for the rest of the year.

The government is eyeing to raise about $5 billion from the issuance of global bonds this year. Finance Chief Ralph G. Recto has said they might offer dollar or Samurai bonds.

For 2024, the BSP expects the country’s BoP position to end at a USD 1.6-billion surplus, equivalent to 0.3% of GDP. – Luisa Maria Jacinta C. Jocson, Reporter