Dollars continued to flow out of the Philippine economy in April, pushing the balance of payments deficit to a new high this year as the country bought more goods and services from abroad than it sold.
In a press statement, the Bangko Sentral ng Pilipinas said the cumulative outflows of hard currency hit $1.497 billion in the first four months of 2018, sharply higher than the $78-million deficit reported in the same period last year.
“The higher cumulative BOP deficit for the first four months of the year may be attributed partly to the widening merchandise trade deficit (based on Philippine Statistics Authority data) for the first quarter of the year that was brought about by the sustained rise in imports to support domestic economic expansion,” the central bank said.
The balance of payments is the net value of all transactions the country has with the rest of the world for various goods and services. A surplus means the country is earning more than it is spending, while a deficit represents the reverse situation.
Target
The central bank had initially targeted a balance of payments deficit of $1 billion for the entire 2018. This level has since been breached, but the yearend tally may still improve or worsen depending on dollar flows in the coming months.
For April alone, the BSP said the overall balance of payments position posted a deficit of $270 million, representing a sharp reversal from the $917 million surplus recorded in the same month last year.
Outflows in April 2018 stemmed mainly from payments made by the national government for its maturing foreign exchange obligations and foreign exchange operations of the BSP.
These were partially offset, however, by income from the BSP’s investments abroad and net foreign currency deposits of the government during the month.
Enough dollars
As this unfolded, the central bank sought to reassure that public that the government has enough dollars on hand to meet the needs of foreign investors repatriating their assets or local businessmen needing to pay for imports.
The reported balance of payments position is consistent with the final gross international reserves level of $79.609 billion as of end-April 2018.
“At this level, the dollar reserves represent more than ample liquidity buffer and is equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income,” the central bank said.
“It is also equivalent to 5.4 times the country’s short-term external debt based on original maturity and four times based on residual maturity,” it added.