Nov. external payment balance marks this year’s second surplus

By Melissa Luz T. Lopez
Senior Reporter
THE PHILIPPINES’ external payments position swung to a surplus in November, supported by a stronger peso and by bigger incomes from the central bank’s foreign investments despite a wider trade gap.
The country’s balance of payments (BoP) posted an $847-million surplus last month, turning around from October’s $458-million deficit as well as the $44-million shortfall recorded in November 2017.
November’s balance also marked this year’s second surplus since August’s $1.272 billion, according to Bangko Sentral ng Pilipinas (BSP) data.
The BoP measures the country’s transactions with the rest of the world at a given time. A surplus shows that more money entered the Philippines, while a deficit means more funds left the economy than what went in.
In a statement, the central bank attributed the November surplus to bigger inflows given bigger income from the BSP’s offshore investments, as well as more dollars coming in from its foreign exchange operations.
The peso pared back losses as it traded at P52 versus the dollar, averaging P52.8083 for the month.
These inflows were partly offset by payments made by the national government for maturing foreign debt, as well as net foreign currency withdrawals during the period.
The November figure brought the year-to-date tally to a $4.747-billion deficit, narrower than $5.594 billion as of October.
The BSP now expects the full-year external payments gap to balloon to $5.5 billion, wider than the $1.5 billion expected in May and the $863 million shortfall recorded in 2017.
The central bank said this reflects the widening merchandise trade deficit, on the back of a sustained rise in imports of raw materials and intermediate goods as well as capital goods. These are meant to “support domestic economic expansion,” the BSP said.
Central bank officials have said that they do not expect the BoP to widen to unsustainable levels, saying that the current level remains “manageable.”
The BSP also said it has ample buffers versus external shocks, with $75.68-billion reserves enough to cover 6.7 months’ worth of import payments.
Ruben Carlo O. Asuncion, chief economist at the Union Bank of the Philippines, Inc., said the BoP will likely log a deficit in the coming months as imports are expected to grow faster.
“As long as exports remain sluggish in the coming months into 2019, I will continue to expect a widening BoP deficit,” Mr. Asuncion said when sought for comment, even as he noted that some relief may come from cooling trade tensions.
“With the US-China planning a January 2019 meeting, the general sentiment about global trade prospects may actually become better, hopefully, positively impacting demand for Philippine exports. Thus, a surplus may be sustained,” he added.
“However, since this information is relatively fresh, I am tentative about the surplus happening for December, although it may come as early as Q1 2019.”
In a separate commentary, analysts at Capital Economics said the Philippines’ trade deficit will likely balloon further in 2019 and would pile pressure on the peso. “With weak global demand set to drag on exports and the government’s infrastructure programme likely to keep imports strong, the current account deficit is expected to widen further over the coming quarters,” the London-based think tank said, tagging the trade gap’s further widening as “one of the key risks” for the economy.
The current account logged a $6.47-billion deficit in the nine months to September, matching the full-year estimate. This is expected to balloon to an $8.4-billion gap in 2019, equivalent to 2.3% of gross domestic product.