8-mo BOP deficit widens to $1.39B

The country’s balance-of-payments (BOP) position in August remained at a deficit, although at a narrower $7 million, amid the “ghost” month in stock market trading.

The latest Bangko Sentral ng Pilipinas data released Tuesday night showed that the BOP deficit last month, which meant that more dollars left the country than what entered, was lower than the $678-million shortfall in July but was a reversal of the $682-million surplus in August last year.

“Outflows during the month were largely offset by the national government’s net foreign currency deposits and the BSP’s income from its investments abroad,” BSP Governor Nestor Espenilla Jr. explained in a statement.

The reduced deficit also reflected the thin trading of portfolio investments during the ‘ghost’ month of August, he added.

At the end of the first eight months, the BOP deficit further widened to $1.39 billion, reversing the $1.53-billion surplus as of end-August last year.

“The cumulative deficit was largely accounted for by portfolio investments, which, for the period January to August this year, reversed to net outflows of $319 million from $2.1-billion net inflows during the same period last year on the back of domestic and global developments, including the US Federal Reserve interest rate hike, global terrorism concerns and closure orders for some mining companies in the country,” Espenilla said.

The BSP chief nonetheless noted that the Philippine Statistics Authority (PSA)-based trade balance showed steady improvement as it registered a narrower deficit of $14.7 billion during the January-to-July period this year compared to the $15.4-billion shortfall in the same period a year ago.

For the same period, the growth of merchandise exports at 13.8 percent outpaced that of merchandise imports at 7.9 percent. It may also be noted that the trade deficit also reflected increased percent share to total imports of raw materials and intermediate goods at 38.6 percent, and capital goods imports at 32.4 percent, indicating continued expansion in domestic economic activity, Espenilla said, citing the latest PSA data.

The current account, a component of the BOP, was expected to swing to a deficit of $600 million this year from a $600-million surplus last year as imports growth outpace that of exports.

BSP officials had said that the surge in imports of capital goods was supporting the growing economy as well as the government’s plan to ramp up infrastructure investments.

The BSP had announced that it expected the BOP position to settle at a deficit of $500 million by the end of this year, such that it will be the second straight year that more dollars would leave the country than what would come in.

In June, the BSP revised its BOP projection for 2017 from the earlier $1-billion surplus projected in December last year.