The recent appreciation of the peso against the US greenback helped draw in more hard currency in November, but failed to derail the Philippines’ steady trek toward recording its biggest full-year net dollar outflow since central bank records became publicly available 19 years ago.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that the country’s overall balance-of-payments (BOP) position yielded a surplus of $847 million in November, marking a reversal from the $44-million deficit recorded in the same month last year.
Despite the surplus for last month, the cumulative dollar flows position for the January-November period registered a deficit of $4.75 billion, which is higher than the $1.78-billion deficit recorded in the comparable period in 2017.
Central bank planners expect to end 2018 with a BOP deficit of $5.5 billion—the widest gap in the BSP’s publicly available database that goes back to 1999. Over the last 19 years, the country has only posted year-end net dollar outflows in 2000 and 2001, at the height of the Estrada political crisis, in 2004 during the Arroyo fiscal crisis, in 2014 with the end of the US Federal Reserve’s quantitative easing policy, and in 2016, 2017 and this year.
“The higher cumulative balance-of-payments deficit for the [January-November period] may be attributed partly to the widening merchandise trade deficit, based on the Philippine Statistics Authority’s preliminary data, for the first 10 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 central bank said.
For November alone, the inflows stemmed mainly from the BSP’s foreign exchange operations and its income from its investments abroad during the month. These were partially offset by the payments made by the national government for its foreign exchange obligations and its net foreign currency withdrawals during the month in review.
The reported BOP position reflected the final gross international reserves level of $75.68 billion as of end-November 2018.
At this level, the dollar reserves represented a more than ample liquidity buffer equivalent to 6.7 months’ worth of imports of goods and payments of services and primary income. The reserves were also equivalent to 5.6 times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.
Only six months ago, the central bank said it expected net dollar outflows by year-end to hit $1.5 billion, which was, itself, already an adjusted projection from the original expectation of a $1-billion deficit for 2018.
This gap was attributed to the country’s yawning trade deficit as the economy imported more goods and services to help fuel the growing economy, amid only a modest performance turned in by the Philippines’ traditional dollar-earning exports.
For next year, the central bank expects net dollar outflows to continue and reach $3.5 billion. Bankers and economists expect the peso to gradually weaken against the US dollar during this time frame.