The country’s balance of payments (BoP) deficit narrowed last month, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.
At $7 million, the August shortfall was lower than July’s $678 million and was a reversal from the $682-million surplus seen a year earlier.
“Outflows … [were]largely offset by the NG’s (national government’s) net foreign currency deposits and BSP’s income from its investments abroad,” the central bank said in a statement.
The BoP deficit also reflected the thin trading of portfolio investments during the “ghost” month, it added.
Year to date, the country’s BoP position stood at deficit of $1.39 billion, also a reversal from $1.53-billion surplus recorded last year.
“The cumulative deficit was largely accounted for by portfolio investments which, for the period January to August this year, reversed to net outflows of $319 million from $2.1 billion [in]net inflows during the same period last year…,” the central bank said.
The blamed the reversal “domestic and global developments including the US Federal Reserve interest rate hike, global terrorism concerns, and closure orders for some mining companies in the country.”
Commenting on the BoP results, Bank of the Philippine Islands Vice President and lead economist Emilio Neri Jr. said: “The improvement in the current account owing to a narrower trade gap must have been the catalyst to this slight improvement in the BoP in August versus the widening gap in the first seven months of 2017.”
The current account—a major component of the payments balance—posted $15-million surplus in the second quarter of 2017, a turnaround from the $1.25-billion deficit recorded a year earlier. It brought the first-half result to a $234-million deficit, lower than the $424 billion posted in the comparable 2016 period.
“We think the BSP target is still achievable if exports continue to accelerate and if capital goods imports continue to contracts,” Neri said.
The central bank revised its 2017 BOP forecast in June to a deficit of $500 million from a previous projection of a $1-billion surplus.
Weak imports, Neri noted, will continue to limit the country’s future growth capacity and affect the government’s plans to lower poverty and unemployment.
The BSP said that the country’s trade balance was steadily improving, posting a narrower deficit of $14.7 billion during the January to July period compared to the $15.4 billion shortfall in the same period a year ago.
Merchandise exports growth of 13.8 percent during the period outpaced that of merchandise imports at 7.9 percent, it added, citing data from the Philippine Statistics Authority.
“It may also be noted that the trade deficit also reflected increased percent share to total imports of raw materials and intermediate goods at 38.6 percent, and capital goods imports at 32.4 percent, indicating continued expansion in domestic economic activity,” the central bank said.
Dutch financial institution ING Bank earlier this week said it was “cautiously optimistic” that the current account for 2017 would be a surplus of around $450 million instead of the $600-million deficit forecast by the BSP.