More cash went out of the country than what went in last March as volatility in global financial markets spooked investors, pushing them to leave emerging markets like the Philippines in favor of safer ports.
Data released by the Bangko Sentral ng Pilipinas (BSP) showed a balance-of-payments (BOP) deficit in March, breaking a three-month streak of surpluses.
The deficit was reflected in the slight decline in the country’s foreign exchange reserves at the end of the first quarter.
In March, the country posted a BOP deficit of $244 million, a reversal of the 18-month high surplus of $985 million in February.
The deficit in March brought the Philippine economy’s year-to-date deficit to $877 million. This was still better than last year’s three-month deficit of $4.47 billion.
The BOP is the difference between the amount of money that enters and leaves the country. Inflows come in the form of remittances, revenues from certain industries such as business process outsourcing (BPO) and tourism, investments and export sales. Foreign debt payments, the importation of goods and divestment by foreign funds are counted as outflows.
Earlier this month, the BSP reported a dip in the country’s foreign exchange reserves, which were sensitive to BOP developments.
The central bank is able to build up its reserves only when more dollars enter the country than what need to be spent. Reserves decline when outflows exceed spending needs. At the end of March, the country’s gross international reserves (GIR) slipped to $80.4 billion from $80.8 billion in February.
BOP data is tracked closely to ensure that the supply of dollars in the economy remains ample enough to allow businesses and the government to transact with the rest of the world.
A shortage of foreign currencies in the Philippines would force the government and the private sector to spend pesos to buy the dollars, pushing the local unit’s value down.