Balance of payments deficit narrowed in May to $439M

MANILA  -The inflow of remittances, investments as well as borrowings significantly narrowed the country’s balance of payments (BOP) deficit to $439 million in May, from $1.6 billion in the same month last year, according to the Bangko Sentral ng Pilipinas (BSP).

However, last May’s BOP—which measures the country’s transactions with the rest of the world—was thrice as wide as the $148-million deficit incurred in April, mainly due to national government spending, including payment of foreign obligations.

“The BOP deficit in May 2023 reflected outflows arising mainly from the national government’s net 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 in a statement.

The latest monthly readout, however, brought the five-month print to a surplus of $2.87 billion, which means more money came in than went out. This was a turnaround from the deficit of $1.53 billion recorded in the same period last year.

“Based on preliminary data, this cumulative BOP surplus was partly attributed to net inflows from personal remittances, net foreign borrowings by the NG, trade in services, and foreign direct investments,” the BSP said.

Forex reserves

Meanwhile, the central bank said the final readout for the gross international reserves (GIR) as of the end of May was $101.6 billion. This was greater than the preliminary figure of $101.3 billion that the BSP saw earlier this June and closer to the $101.8 billion recorded in April.

GIR held steady above $100B in April, says BSP

The BSP said the latest GIR level represented a more than adequate external liquidity buffer, equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income.

The GIR is also about 5.8 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

Widest since February

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said the BOP deficit in May was the widest in three months or since the $895 million seen in February.

Ricafort said the BOP data could continue to see support from the continual growth in US dollar inflows such as remittances from overseas Filipino workers, revenues from business process outsourcing, foreign direct investments, exports and foreign tourism receipts, among others.

Support could also come from “the further narrowing of the country’s trade deficit amid the recent decline in world prices of crude oil and other (imported) commodities,” he added.

Last week, the BSP said the full-year BOP in 2023 was now expected to settle at a narrower deficit of $1.2 billion from the $1.6 billion forecast three months ago, amid slower activities worldwide.

BSP trims ’23 BOP deficit forecast to $1.2B

In particular, the Philippines’ deficit in the trade of goods is expected to be narrower this year as both exports and imports decline amid decreasing commodity prices.

Also, the growth in remittances from overseas-based Filipinos is expected to be supported by steady demand for Filipino workers amid a labor shortage in destination countries. INQ