BOP deficit eased to $196M in Feb
MANILA, Philippines — Outflows from the government’s foreign debt payments kept the Philippine balance of payments (BOP) position in a deficit in February, although the shortfall was smaller due to a narrower trade gap.
The country incurred a deficit of $196 million last month but it was much lower than the $895 million gap recorded in the same period last year, data released on Tuesday by the Bangko Sentral ng Pilipinas (BSP) showed.
The February BOP deficit was also narrower than the $740-million shortfall registered in January. Explaining the latest outturn, the central bank said the dollar outflows last month had mostly come from payments of the government’s foreign currency debt obligations.
READ: PH dollar position back to deficit in Jan–BSP
Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), said the smaller BOP gap in February was due to shrinking trade deficit amid a decline in imports.
The BOP summarizes a country’s economic transactions with the rest of the world during a certain period. A deficit arises when more foreign funds left the economy against those that entered, which may reduce the foreign exchange resources used to pay for foreign debts and meet import requirements. A BOP surplus means the reverse happened.
Dollar reserves still enough
In the first two months of 2024, the Philippines posted a dollar deficit of $936 million, a reversal from the $2.2-billion surplus a year ago or when proceeds from the sovereign global bond issuance had contributed to inflows.
That, in turn, reduced the country’s gross international reserves (GIR)—which serve as the country’s buffer fund against external shocks—to $102 billion in February, from $103.3 billion in January. But the BSP said the GIR level is more than enough to pay for 7.5 months’ worth of imports. The dollar reserves are also about six times the country’s short-term external debt based on original maturity and 3.6 times based on residual maturity.
READ: PH forex reserves slipped for 2nd month in Feb to $102.7B
Moving forward, RCBC’s Ricafort said a narrowing trade deficit amid a continued decline in global oil prices could boost the Philippine dollar position in the coming months. The country is a net importer of oil.
This year, BSP projects a BOP surplus of $700 million, better than the previous forecast of a $400 million windfall. The revised prediction, however, was smaller than the $3.7-billion BOP surplus recorded in 2023.
In 2025, the BSP is expecting a BOP deficit of $500 million.
