First quarter dollar gap narrows with strong March inflow, says BSP

The Philippines earned more dollars than it spent for the second consecutive month last March, which resulted in a narrower deficit of fund flows with other countries in the first quarter of this year, the central bank said on Tuesday (June 2).

In a statement, the Bangko Sentral ng Pilipinas (BSP) said the country’s overall balance of payments position posted a surplus of $448 million in March 2020, which was lower than the $627-million surplus recorded in the same month in 2019.

“The balance of payments surplus in March 2020 reflected mainly the inflows arising from the BSP’s foreign exchange operations as well as income from its investments abroad, and the national government’s foreign currency deposits with the BSP,” it said.

These inflows were partially offset, however, by the foreign currency withdrawals made by the national government to pay its foreign currency debt obligations during the month in review.

The balance of payments tally represented the total net value of the economy’s dealings with foreign parties.

This year central bank authorities expect net dollar inflows to the Philippines to reach least $3 billion, driven mainly by remittances from expatriate Filipino workers, tourism receipts, as well as earnings from the country’s business process outsourcing industry.

It was a forecast, however, that will likely change with the effects of the coronavirus pandemic on the economy that began with a Luzon-wide lockdown in March.

The balance of payments surplus last March reduced the cumulative deficit for January to March 2020 to $68 million, from a deficit of $516 million for the first two months of 2020.

Despite this, the current year-to-date balance of payments level is still a reversal from the $3.8-billion surplus recorded in the first quarter of 2019.

“This development may be attributed partly to the reversal of foreign portfolio investments to net outflows from net inflows in the first quarter of 2019, even as the merchandise trade deficit declined,” the central bank said.

The balance of payments position reflected the final gross international reserves level of $88.86 billion as of end-March 2020.
The central bank said that, at this level, the country’s dollar reserves represent an ample external liquidity buffer, which is equivalent to around 7.9 months’ worth of imports of goods and services and payments of primary income. It is also about 5.3 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.

Edited by TSB