August marks 4th straight month of BoP deficit

THE COUNTRY’S external payments position logged a deficit in August for the fourth straight month — though it was the smallest in that period, the Bangko Sentral ng Pilipinas (BSP) reported late Tuesday, prompting analysts to say this now made the case for a wider-than-expected gap for the entire year.

The Philippines’ balance of payments (BoP) position posted a $7-million deficit last month, scaling down from the $678-million gap seen in July but reversing from the $682-million surplus logged in August 2016, the central bank said.

The BoP measures the country’s transactions with the rest of the world at a given time. A deficit means more funds left the economy compared to what went in, while a surplus shows that more money entered the Philippines.

August’s deficit was the smallest since April’s $917-million surplus, which was also the last time the monthly balance stood in positive territory.

This brought the year-to-date BoP to a $1.391-billion deficit, a turnaround from the $1.531 billion surplus posted in the same eight months last year.

In a statement, the BSP said outbound funds were offset by dollar inflows from foreign currency deposits held by the national government as well as income from the central bank’s offshore investments.

“The reduced deficit also reflected the thin trading of portfolio investments during the ‘ghost’ month,” the BSP said, referring to the period Aug. 22-Sept. 19 when, according to Chinese tradition, investors should not make any big decision.

The peso also hit fresh 11-year-lows last month, peaking at P51.49 versus the dollar on Aug. 18. The running tally showed that the peso has averaged at P50.1324-per-dollar for the first eight months of 2017.

OFW remittances totalled $16.095 billion as of end-July, up five percent from $15.323 billion and beating the central bank’s four percent growth estimate. Business process outsourcing also totalled $11 billion during the first semester, according to BSP data.

Sought for comment, two analysts said the continued BoP deficit is expected and should not be a cause for alarm among market players just yet, as it simply reflects strong economic growth at a time of volatile global financial markets.

“The external position remains negative because of persistent trade-in-goods deficit and net outflows of portfolio investments. However, I believe this is not worrisome because the BoP deficit is only less than one percent of GDP and that external buffers are well above the adequate level,” Security Bank Corp. economist Angelo B. Taningco said in an e-mail.

Some analysts have pointed out the Philippines’ persistent current account deficit — which is among the key components of the country’s external position — has been a concern of some market observers. However, central bank officials have dismissed such worries, saying that the deficit simply reflects increased importation due to the aggressive infrastructure plans being pursued by the Duterte administration.

The central bank expects a $500-million BoP deficit this year, equivalent to 0.2% of gross domestic product (GDP). If realized, this will be slightly wider than the $420-million deficit logged in 2016 which accounted for 0.1% of GDP.

Mr. Taningco said the deficit could ease from the current level should the trade-in-goods deficit decline over the coming months, and if remittances and foreign direct investments can sustain its respective growth trends.

If so, the BoP could eventually settle at a $750-million deficit or half the current level.

Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, said the BoP figures may see a slight recovery although the full-year tally will still remain in deficit.

“Just looking at the behavior of the peso so far and the impact on the trade balance, where exports have outgrown imports this year. With the continued acceleration of global economic growth, a slight surplus can be possible [for the last few months],” Mr. Asuncion said separately, while noting that a $1-billion deficit would be “more realistic” than the BSP’s latest estimate.

The central bank is currently reviewing its macroeconomic assumptions and forecasts, which are set to be announced before yearend. — Melissa Luz T. Lopez