Philippines’ payments position reverts to deficit in March —BSP

The Philippines’ balance of payments (BOP) position stood at a deficit in March, a reversal from a surplus recorded in the same period last year, the Bangko Sentral ng Pilipinas (BSP) reported on Thursday.

Data released by the BSP showed that the BOP position stood at a deficit of $73 million last month, a turnaround from the $448-million surplus recorded in the same month last year.

The BOP consists of Philippine transactions with the rest of the world during a specific period. A surplus means more funds entered the country, while a deficit means more funds went out.

“The BOP deficit in March 2021 reflected outflows arising mainly from the national government’s net withdrawal of its foreign currency deposits with the BSP, which were largely used for debt servicing,” the central bank said.

Compared to the prior month, the BOP deficit in March is narrower compared to the $2.02-billion in February.

In an emailed commentary, Rizal Commercial Banking Corp. chief economist Michael Ricafort said that the narrower BOP deficit could be attributed some reduction in the trade deficit amid the slower recovery in imports relative to exports, as well as the recent stronger remittances data.

The slimmer BOP deficit could also be attributed to slower business or economic activities due to the tighter quarantine standards and the hard lockdowns that followed in NCR Plus since the latter part of March.

For the January to March period, the cumulative BOP position registered a deficit of $2.84 billion, which is higher than the $68 million deficit recorded in the same period in 2020.

“Based on preliminary data, this cumulative BOP deficit was due largely to the national government’s net repayments of its foreign loans and the country’s merchandise trade deficit,” the BSP said.

The central bank said the BOP position reflects a decrease in the final gross international reserves (GIR) level to $104.48 billion as of end-March 2021 compared with $105.16 billion as of end-February 2021.

“The latest GIR level represents a more than adequate external liquidity buffer, which can help cushion the domestic economy against external shock,” the BSP said.

The buffer is equivalent to 12 months’ worth of imports of goods and payments of services and primary income, according to the central bank.

“Moreover, it is also about 7.3 times the country’s short-term external debt based on original maturity and 5.2 times based on residual maturity,” it said.

For his part, Ricafort said that going forward, any improvement in BOP and GIR for the coming months could help provide a greater buffer for the peso exchange rate versus the US dollar especially against speculative attacks.

“The still near record-high GIR may also further strengthen the country's external position, which in turn, fundamentally supports the country's favorable credit ratings as seen recently,” he said. — BM, GMA News