BOP swings to $839-M surplus in February

The Philippine balance of payments (BOP) was back in the black in February as the amount it earned from its transactions with the rest of the world outpaced the amount of dollars it spent, according to the latest data from the central bank.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said the $839-million surplus for February sharply reduced the country’s BOP deficit for the first two months of the year to $516 million from the net outflow of $1.3 billion in January.

The BOP tally represents the total net value of the economy’s dealings with foreign parties.

This year, central bank authorities expect net dollar inflows to the Philippines of at least $3 billion, driven mainly by remittances from expatriate Filipino workers, tourism receipts as well as earnings from the country’s business process outsourcing (BPO) industry—a forecast that will likely change with the effects of the coronavirus pandemic on the economy that began with a Luzon-wide lockdown in March.

According to the central bank, the surplus in net dollar flows in February reflected mainly the transactions arising from the national government’s foreign currency deposits with the BSP, the central bank’s own foreign exchange operations as well as income from its investments abroad.

These inflows were partially offset by payments made by the national government for servicing its foreign debt obligations during the month.

The central bank noted that the BOP deficit for the January to February period marked a turnaround from the $3.17-billion surplus in the first two months of 2019.

“The deficit may be attributed partly to merchandise trade deficit and net outflows of foreign portfolio investments based on the latest available data,” the BSP said.

The BOP position reflects the final gross international reserves level of $88.19 billion as of end-February 2020.

The central bank said this level of dollar reserves “represents ample liquidity buffer equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income.” It is also equivalent to 5.1 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.

In general, a surplus of dollar inflows into the local economy supports the value of the peso against the US dollar in the foreign exchange market, while a dollar flow deficit has the opposite effect.

The Philippines ended last year with a BOP surplus of $7.8 billion, which was its highest level in seven years, coming off a $2.3-billion deficit in 2018.