Despite the BOP deficit in 2014, analysts expect:

Ample GIR to cushion PH vs shocks


The Philippines incurred the biggest deficit in 14 years in its balance of payments for 2014, but the shortfall had been expected by analysts—given the investment outflows that began last year as the United States Federal Reserve began easing its quantitative easing policy—and is not projected to have a significant impact on the economy this year.

Analysts said they expect the Philippine economy and financial system will be strong enough to withstand external shocks in 2015 that could come from volatility in the global markets, despite seeing the country’s balance of payments (BOP) swinging to a deficit in 2014 from a surplus the preceding year.

The latest data from the central bank showed the country incurred a $2.88 billion shortfall in its payments position in full-year 2014 despite posting a monthly surplus of $843 million for December. Statistics from the Bangko Sentral ng Pilipinas (BSP) also showed the country’s BOP deficit sharply reversed the $5.09 billion surplus in 2013. It is now also the widest deficit recorded since year 2000 when the country posted a $509 billion shortfall.

Nicholas Antonio Mapa, associate economist at the Bank of the Philippine Islands (BPI), said the negative payments balance last year was, somehow, expected due to projections of money outflows in 2014. That was when the US regained its attractiveness as an investment destination with the prospect of interest rate hikes by the Fed in the year ahead.

Mapa, however, sees the BOP gap having little impact on the local economy even if the country continues to experience bouts of fund outflows this year.

“Although this was the first deficit in a while, the drawdown in reserves is (going to be) minimal compared with the immense amount of GIR (gross international reserves) we have at the ready,” Mapa told The Manila Times.

The country’s GIR as of end-November stood at $78.89 billion, providing buffer of 10.7 months worth of imports of goods and payments of services and income. These foreign assets, which are readily available and controlled by the central bank for direct financing of payments imbalances,consist of holdings of gold, special drawing rights, foreign investments, and foreign currency. Higher reserves provide monetary authorities with some flexibility in managing both the exchange rate for the peso and domestic inflation.

“Roughly $79 billion (of GIR) is more than enough to see us through this episode,” Mapa said.

The head of research at online brokerage firm COL Financial Group Inc., April Lynn Tan, said she does not expect the negative BOP position to have a significant impact on the economy as long as the current account, one of its major components, remains in surplus.

“The reversal is due to portfolio outflow. The current account, which is less volatile and more recurring, (on the other hand), remained strong,” she said.

For its part, the BSP said it will remain focused on strengthening the country’s buffer against headwinds arising from external developments.

“Going forward, our policy remains to strengthen our buffers against external shocks so that good macrofundamentals would continue to be a pull factor for investments,” BSP Governor Amando Tetangco Jr. said.

Current accounts consist of transactions in goods, services, primary income and secondary income, and measure the net transfer of real resources between the domestic economy and the rest of the world.

The Philippines’ current account registered a surplus of $3 billion, equivalent to 4.4 percent of the country’s GDP, in the third quarter, up by 15 percent against the $2.6 billion surplus recorded in the same quarter last year. The BSP has yet to announce details of the BOP for the fourth quarter of 2014.


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