Strong inflows to cap full year dollar deficit

MANILA  -The Philippines’ paid more than it received through transactions with the rest of the world by $606 million in June, or just about two-fifths of the $1.6-billion deficit in the same month last year.

The Bangko Sentral ng Pilipinas (BSP) said in a statement the narrower deficit in the monthly balance of payments (BOP) was mainly due to the national government’s net withdrawal of its foreign currency deposits with the BSP.

The funds were used to settle the national government’s foreign currency debt obligations and pay for its various expenditures.

Through narrower on a year-on-year basis, the latest readout was the widest deficit during three consecutive months of incurring a deficit, from April to June.

Back to surplus

Also, June results brought the first-semester print to a surplus of $2.26 billion, which was a turnaround from a deficit of $3.1 billion in the first half of 2022.

“Based on preliminary data, the cumulative BOP surplus reflected inflows that stemmed mainly from personal remittances, net foreign borrowings by the national government, trade in services and foreign direct investments,” the BSP said.

At the same time, the central bank said the final readout for the gross international reserves (GIR) as of the end of June registered at $99.4 billion.

READ:  PH forex reserves sank back below $100B in June

This was less than the preliminary figure of $99.8 billion and meant a reduction of $1.2 billion from the $100.6 billion recorded at the end of May.

The BSP said the latest GIR level continues to represent a more than adequate external liquidity buffer that is equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income.

The GIR is also about 5.7 times the country’s short-term external debt based on original maturity and four times based on residual maturity.

Michael Ricafort, chief economist at the Rizal Commercial Banking Corp., noted that despite a string of monthly deficits, the BOP position since the start of the year continued to reflect a surplus, thanks partly to the issuance of global bonds and inflows of official development assistance and other multilateral grants.

Other contributors

Ricafort said other factors that are helping keep the year-to-date BOP tilted to a surplus include the continuously growing inflows of inbound remittances from overseas-based Filipinos, revenues from business process outsourcing and revenues from foreign tourists.

READ: Balance of payments deficit narrowed in May to $439M

He added that the government’s plan to raise $2 billion from the issuance of US dollar-denominated retail Treasury bonds would also help maintain a BOP surplus. Finance officials said they plan to do this in September.

The BSP said the full-year BOP in 2023 is now expected to settle at a narrower deficit of $1.2 billion from the $1.6 billion forecast three months ago, amid slower activities worldwide.

In 2022, following three consecutive years of full-year surpluses, the BOP settled at a deficit of $7.26 billion.

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