BOP surplus target still attainable, says BSP

BSP Governor Amando M. Tetangco Jr. INQUIRER FILE PHOTO

The central bank remains confident that the target for the country’s external payments position is still within reach, implying a strong recovery in investment flows in the coming months.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said the country may still end the year with balance of payments (BOP) surplus.

“Financial conditions have settled down since the initial forecasts were generated and our thinking to date is that ‘the forecast’ remains attainable,” Tetangco said.

In July, the country’s balance of payments (BOP) position swung to a surplus of $501 million, better than the $24-million deficit the month before.

A BOP surplus means more foreign money entered the economy than exited. A deficit means the opposite.

Apart from the current account, the Philippines also benefited from dollar deposits by the government and income from the BSP’s investments from overseas.

The BOP position is an indication of the country’s ability to withstand external economic crises that may lead to a shortage in the amount of foreign exchange in the system.

Dollars are needed by companies and the government to do business with the rest of the world.

A shortage will force locals to buy foreign exchange from abroad, which may weaken the peso.

Thanks to the surplus in July—the highest since November’s $837 million—the seven-month BOP position stood at a deficit of $3.64 billion.

This was an improvement from the end-June deficit of $4.14 billion.

For 2014, the BSP expects the Philippines to achieve a BOP surplus of $1.1 billion.

This means the surplus seen in July should increase further to offset the deficit seen earlier this year.

The current forecast was downscaled from the previous projection of $3 billion.

The new forecast reflects the outflow of investments in January, and a wider trade deficit due to the need for higher imports this year for reconstruction efforts in Visayas.