BSP: Pandemic-induced drop in imports to keep PH’s dollar flows in surplus

The Philippine e­co­­no­my earned more dollars than it spent in the first four months of the year—a trend that will likely continue for the rest of 2020 due to the pandemic-induced reduction in the country’s total import bill.

Thus said the chief of the Bangko Sentral ng Pilipinas (BSP) who also pointed out that lower imports would mean a narrower trade deficit by year’s end which, in turn, would likely help keep the peso strong against the greenback.

“The overall balance of payments levels in 2020 and 2021 are projected to sustain the current surplus trend, though at levels lower than prior to the COVID-19 pandemic,” BSP Governor Benjamin Diokno said, referring to the net tally of the country’s transactions with the rest of the world.

This balance of payments as percentage of the value of the country’s economic output will fall from the central bank’s original 0.7 percent forecast made in November 2019 to 0.2 percent of gross domestic product (GDP) in their revised May 2020 projection, and increase to 0.6 percent by 2021.

As percentage of GDP, the projected deficit in the current account—the net tally of trade-related transactions with the rest of the world—will decrease from -2.1 percent as of November 2019 to -0.5 percent in the latest forecast, and it will inch up to -4.4 percent by 2021 as economic activity picks up.

Over the weekend, the central bank said the country’s overall balance of payments position last April hit a surplus of $1.67 billion, higher than the $467 million surplus recorded in the same month last year.

“The surplus in April 2020 reflected mainly the inflows arising from the national government’s deposit with the BSP of its foreign loan proceeds as well as the BSP’s foreign exchange operations and income from its investments abroad,” the statement said.

These inflows were partially offset, however, by the foreign currency withdrawals made by the national government to pay its foreign currency debt obligations during the month.

The surplus in April 2020 brought the cumulative dollar flows position to a surplus of $1.6 billion in the first four months of the year from a deficit of $68 million in the January-March period.

This level was lower than the $4.27-billion surplus recorded in the same period a year ago. INQ