Dollar outflows as of Feb. near BSP’s full year forecast

They’ve only tallied the numbers for the first two months of the year but already, the dollar outflows from the local economy is threatening to hit the central bank’s full year target.

In a press statement, the Bangko Sentral ng Pilipinas said that the country’s overall balance of payments position in the January-February 2018 period has reached a deficit of $961 million compared to the $445 million deficit recorded in the same period of last year.

The balance of payments represents the aggregate net value of dollars moving into or out of the local economy. A deficit means the Philippines spent more dollars during the period for imported goods and services compared to what it earned from exports.

The central bank had originally expected this deficit to hit $1 billion by the end of 2018 on the back of a substantial trade deficit as the country buys more goods and services from overseas to account for the Duterte administration’s infrastructure buildup program.

The BSP attributed the outflow of hard currency partly to the widening merchandise deficit in January 2018 as well as higher net outflows of foreign portfolio investments for the first two months of the year.

For February alone, the country posted a dollar flow deficit of $429 million, slightly lower than the US$436 million deficit recorded in the same month last year.

This was due to the cost of its currency market intervention as authorities tried to mitigate the volatility in the exchange rate, while the government also paid off some of its foreign debt.

The central bank said that the balance of payments position reflected the final gross international reserve level of $80.4 billion as of end-February 2018.

At this level, the dollar reserves represent “more than ample liquidity buffer” and is equivalent to 7.9 months’ worth of imports of goods and payments of services and primary income, the central bank statement said. It is also equivalent to 5.6 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

Last week, the central bank predicted that the Philippines will continue to see large outflows of US dollars for the rest of the year.

BSP Assistant Governor Francisco Dakila Jr. said planners at the monetary authority expected the country’s balance of payments to remain in deficit in 2018, even as he conceded that it was “difficult” to forecast exactly when the outflows would end.

In 2017, this balance of payments deficit hit $863 million which is double the end-2016 figure.