More dollars left the local economy than entered it in February—marking the second consecutive month of net outflows—as the national government repaid some of its foreign obligations, according to the central bank. Data from the Bangko Sentral ng Pilipinas showed that the country’s overall balance of payments position posted a deficit of $2.02 billion in the second month of 2021.
This represented a reversal from the $839 million in dollar flows surplus recorded in the same month last year, and continues the deficit recorded in January of this year.
“The deficit in February 2021 reflected outflows, arising mainly from the BSP’s reserves management operations and the foreign currency withdrawals of the national government’s deposits with the BSP as payment for its foreign currency debt obligations,” the central bank said. These outflows were partly offset, however, by the inflows from the BSP’s foreign exchange operations and income from its investments abroad.
The balance of payments represents the net amount of dollars that flow into and out of a nation’s economy for a particular period. It tallies the movement of foreign exchange due to a country’s exports of goods and services, remittances from expatriate citizens, and investment inflows, among others, versus outflows due to import spending, investment repatriations and other outflows. A surplus means the country is making more dollars than it is spending and usually results in the local currency appreciating against other currencies, while the opposite is true in the case of a balance of payments deficit.
For the first two months of 2021, the cumulative balance of payments position registered a deficit of $2.77 billion, which is higher than the $516 million deficit recorded in the same period a year ago.
Based on preliminary data, this cumulative deficit was due largely to the net repayments of the national government’s foreign loans and the country’s merchandise trade deficit.
The central bank said the balance of payments position reflects a decrease in the final gross international reserves level to $105.16 billion as of end-February 2021 from $108.67 billion as of end-January 2021.“The latest dollar reserves level represents a more than adequate external liquidity buffer, which can help cushion the domestic economy against external shocks,” the central bank said. This buffer is equivalent to 12 months’ worth of imports of goods and payments of services and primary income. It is also about 7.5 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity. INQ