BOP deficit widens as gov’t pays more debt

THE PHILIPPINES posted a balance of payments (BOP) deficit for the second straight month in February as the government paid more debt.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed a BOP deficit of $316 million, a reversal of the $985-million surplus registered a year ago.

The February figure is, however, lower than the $813-million deficit posted in January.

BSP Deputy Governor Diwa C. Guinigundo said the February deficit was “mainly a result of debt servicing by the national government.”

As of end-February, the BOP deficit widened to $1.129 billion, a reversal of the $1.121-billion surplus in the first two months of last year.

“January was especially challenging due to some outflows given the negative market sentiment following the expected US Fed tightening and China slowdown. February yielded less negative BOP position with the resumption of capital inflows,” Guinigundo said.

According to Guinigundo, the BSP does not expect the BOP deficit to persist until the end of the year.

“We expect the BOP to show some $2 billion in surplus on account of sustained current account surplus courtesy of remittances and BPO (business process outsourcing) revenues,” he said.

This year, cash remittances were projected to grow 4 percent from a record $25.8 billion last year, while BPO revenue was seen to hit $25 billion.

The BOP is a summary of all the businesses the country does with the rest of the world.

BOP data is tracked closely to ensure that the supply of dollars in the economy remains ample to allow the government and businesses to transact with the rest of the world.

Last year, the BOP swung to a surplus of $2.6 billion, a turnaround from the $2.9-billion deficit in 2014.

The end-2015 surplus meant the amount of dollars that entered the economy was more than the money that left the country.

The BSP had projected the BOP surplus to reach $2.2 billion this year and result in an increase in the gross international reserves (GIR) to $82.7 billion, equivalent to nine months of import cover.

The country’s dollar reserves reached a two-year high of $81.3 billion as of end-February, the latest BSP data showed.

The BSP had attributed the bigger GIR in the first two months to revaluation adjustments on the BSP’s foreign currency-denominated reserves and gold holdings resulting from the increase in the price of gold in the international market, net foreign currency deposits by the national government as well as the BSP’s income from investments abroad.

The end-February GIR level can cover 10.4 months’ worth of imports of goods as well as payments of income and services.