The dollars continued to flow out of the Philippine economy as the final quarter of the year began, albeit at a more measured pace in October, as the country continued to spend more hard currency than it could earn, the central bank said.
The latest data from the Bangko Sentral ng Pilipinas on Monday revealed the total balance of payments deficit of the local economy has ballooned to $5.59 billion during the first ten months of 2018.
This marks the largest net outflow of dollars from the economy since the $9.2-billion deficit recorded at the end of 2012, although the current balance of payments position may still widen or narrow depending on fund and trade flows for November and December.
The balance of payments (BOP) position is the sum total of all the country’s trade and financial transactions with the rest of the world. A surplus means the country makes more dollars than it spends and usually results in a stronger peso, while the opposite is true in a deficit like the current situation.
The latest balance of payments position is already over 260 percent above the $1.5-billion deficit the central bank’s planners were forecasting by the end of 2018.
“The higher deficit may be attributed partly to the widening merchandise trade deficit (based on the Philippine Statistics Authority’s preliminary data) for the first three quarters of the year,” the BSP said in a statement.
“This, in turn, was brought about mainly by the sustained rise in imports of raw materials and intermediate goods as well as capital goods to support domestic economic expansion,” it added.
The country’s overall balance of payments position posted a deficit of $458 million in October 2018 alone, higher than the $368 million deficit recorded in the same month last year.
Outflows in October 2018 stemmed mainly from payments made by the national government for its foreign exchange obligations, the government’s net foreign currency withdrawals, and foreign exchange operations of the BSP. These were partially offset, however, by the BSP’s income from its investments abroad.
The reported BOP position reflected the final gross international reserve level of $74.71 billion as of end-October 2018.
“At this level, the [dollar reserves] represent a more than ample liquidity buffer and is equivalent to 6.8 months’ worth of imports of goods and payments of services and primary income,” the central bank said.
It is also equivalent to 5.7 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity. /kga