BOP deficit widened to $1.8B in July

The worsening imbalance in favor of imports bound for the Philippines over exports brought the country’s balance of payments (BOP) to a deficit of $1.8 billion in July, according to the Bangko Sentral ng Pilipinas (BSP), a reversal from the surplus of $642 million recorded in July 2021 and wider than the $1.57 billion recorded in June.

“The BOP deficit in July 2022 reflected outflows arising mainly from the national government’s foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said.

The Bureau of the Treasury has not yet released data on the national government’s debt stock for the end of July. But as of the end of June, outstanding foreign debt amounted to a total equivalent to P4.02 trillion.

Also, the end-July BOP brought the seven-month or January-July result to a deficit of $4.9 billion or more than thrice the $1.3-billion deficit recorded in the same period of 2021.

The BOP widened because the Philippines is paying for an ever mounting importing bill compared to export receipts. The BSP insists, however, that the country’s stock of foreign exchange reserves are still more than adequate.

Trade deficit

“Based on preliminary data, this cumulative BOP deficit reflected the widening trade in goods deficit,” the BSP said.

Citing preliminary data from the Philippine Statistics Authority’s latest International Merchandise Trade Statistics (IMTS) report, the trade deficit for the first semester reached $29.8 billion, up from the $18-billion trade deficit posted in the same period last year.

Further, the BSP said final figures for the gross international reserves (GIR) as of the end of July showed $99.8 billion. The central bank earlier this month reported a preliminary figure of $98.9 billion.

The GIR decreased for the fifth straight month and sank below the $100-billion mark for the first time since reaching $100.4 billion in September 2020 when the global fallout of the COVID-19 pandemic slashed the Philippines’ import bill.

The GIR peaked at $110.12 billion in December 2020, when it was enough to cover 11.7 months’ worth of imports of goods and payments of services and primary income.

The BSP reiterated that the latest GIR level represents a more than adequate external liquidity buffer equivalent to 8.3 months’ worth of imports of goods and payments of services and primary income.

The GIR is also about 7.2 times the country’s short-term external debt based on original maturity and 4.6 times based on residual maturity.

—Ronnel W. Domingo