The country’s transactions with the rest of the world, having been in deficit since January, turned a corner and posted a surplus in August totaling $1.27 billion, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.
This was a turnaround from year-ago deficit of $7 million and from the previous July when the balance of payments also stood as a deficit reaching $455 million.
This was also the second time this year when the imbalance stood above the billion-dollar level that analysts and officials attributed to investment earnings of the central bank from its overseas engagements and the foreign currency deposits of the national government (NG).
“The country’s overall balance of payments (BoP) position yielded a surplus of $1.27 billion in August 2018, a reversal from the $7 million deficit recorded in the same month last year.
Inflows in August 2018 stemmed mainly from net foreign currency deposits of the NG and income from the BSP’s investments abroad during the month. These were partially offset, however, by the payments made by the NG for its foreign exchange obligations and foreign exchange operations of the BSP during the month in review,” the BSP said.
But even then, the BoP or what is left of the country’s foreign currency earnings following deductions arising from its foreign currency expenses, stood as a deficit as wide as $2.44 billion in the first eight months this year.
According to BSP data, the eight-month imbalance widened further this year by 75.5 percent from the year ago deficit of just $1.39 billion.
“Notwithstanding the surplus posted in August, the cumulative BoP position for the period January-August 2018 registered a deficit of $2.44 billion, higher than the $1.39 billion BoP deficit recorded in the comparable period in 2017.
“The higher cumulative BoP deficit for the period may be attributed partly to the widening merchandise trade deficit (based on the Philippine Statistics Authority’s preliminary data) for the first seven months of the year that was brought about by the sustained rise in imports of raw materials and intermediate goods as well as capital goods to support domestic economic expansion,” the BSP said.
The widening BoP imbalance coincided with a parallel development in the fiscal sector where the nation’s books similarly stood as a shortfall aggregating P282 billion in the first eight months.
This means NG is spending far more money than it generated for the period in pursuit of the multiyear Build, Build Build program under President Duterte.
While government collection aggregated P1.91 trillion during the period, disbursements totaled P2.19 resulting in a deficit of P281.98 billion.
Still, the BSP said the deficit in the balance of payments remains “consistent with the final gross international reserves (GIR) level of $77.93 billion as of end-August 2018.
“At this level, the GIR represents a more than ample liquidity buffer and is equivalent to 7.1 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 6.4 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity,” it said.