The Philippine economy continued to spend foreign currency faster than it could earn it in the first eight months of the year, but this balance of payments deficit narrowed due to inflows in the month of August, the central bank said on Wednesday.
In a press statement, the Bangko Sentral ng Pilipinas (BSP) said that the aggregate net value of all the country’s transactions for goods and services with the rest of the world stood at $2.44 billion during the January-August 2018 period.
This was 75 percent higher than the $1.39-billion deficit recorded in the same period last year. The eight-month figure for 2018 is also 62 percent higher than the $1.5 billion balance of payments deficit the central bank expects the country to end the year with.
“The higher cumulative deficit for the period may be attributed partly to the widening merchandise trade deficit (based on the Philippine Statistics Authority’s preliminary data) for the first seven months of the year that was brought about by the sustained rise in imports of raw materials and intermediate goods as well as capital goods to support domestic economic expansion,” the BSP said.
For the month of August alone, the country’s overall balance of payments position posted a surplus of $1.27 billion, marking a reversal from the $7 million deficit recorded in the same month last year.
Inflows in August 2018 stemmed mainly from foreign currency deposits of the national government which raised $1.4 billion from a bond issue in the Japanese market that month, and income from the BSP’s investments abroad during the month. These were partially offset, however, by the payments made by the government for its foreign exchange obligations and foreign exchange operations of the BSP during the month in review.
The reported dollar flows position is consistent with the final gross international reserve level of $77.93 billion as of end-August 2018.
“At this level, the country’s dollar reserves represent a more-than-ample liquidity buffer and is equivalent to 7.1 months’ worth of imports of goods and payments of services and primary income,” the central bank said. “It is also equivalent to 6.4 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity.”
The central bank continually points out that the large trade gap — where the country has been spending more dollars than it has been earning — is due to higher imports of goods and services to support the Duterte administration’s economic growth efforts. /kga