MANILA, Philippines—For the third month in a row in 2021, more dollars streamed out of the Philippines than entered it, reversing 2020’s trend of successive monthly surpluses as the COVID-19 pandemic savaged the economy.
While economic activity has been picking up in 2021, data from the Bangko Sentral ng Pilipinas (BSP) showed that the balance of payments deficit in the first quarter of the year has been so far driven by debt repayments being made by the national government to foreign creditors.
In a statement, the BSP said that the country’s overall balance of payments position posted a deficit of $73 million in March 2021, a reversal from the $448 million surplus recorded in the same month in 2020.
“The BOP deficit in March 2021 reflected outflows arising mainly from the national government’s net withdrawal of its foreign currency deposits with the BSP, which were largely used for debt servicing,” the BSP said.
The balance of payments represents the net flow of dollars into and out of a country’s economy representing transactions for buying or selling goods and services with the rest of the world, as well as the flow of short or long term capital.
For the January-March period, the cumulative balance of payments position registered a deficit of $2.84 billion, which is higher than the $68 million deficit recorded in the same period in 2020. Based on preliminary data, this cumulative deficit was due largely to the government’s net repayments of foreign loans and the country’s merchandise trade deficit.
The balance of payments position reflects a decrease in the final gross international reserves level to $104.48 billion as of end-March 2021 compared with $105.16 billion as of end-February 2021.
“The latest [dollar reserve] level represents a more than adequate external liquidity buffer, which can help cushion the domestic economy against external shocks,” the BSP said.
This buffer is equivalent to 12 months’ worth of imports of goods and payments of services and primary income.
It is also about 7.3 times the Philippines’ short-term external debt based on original maturity and 5.2 times based on residual maturity.