Q1 balance of payments deficit hits $2.84B

For the third month in a row this year, more dollars exited the Philippines than entered it, reversing last year’s trend of successive monthly surpluses as the coronavirus pandemic savaged the economy.

While economic activity has been picking up this year, however, data from the central bank 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 Bangko Sentral ng Pilipinas (BSP) said 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 last year.

“The BOP (balance of payments) 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 central bank said.

The balance of payments represents the net flow of dollars into and out of a country’s economy representing its 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.

Dollar reserves down to $104.4B ‍in March

For the January-March period, the cumulative balance of payments position registered a deficit of $2.84 billion, higher than the $68 million deficit recorded in the same period last year. Based on preliminary data, this cumulative deficit was due largely to the government’s net repayments of its 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 from $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 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 7.3 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity. —Daxim L. Lucas