The Philippines posted a cumulative balance of payments (BOP) deficit of $3.53 billion for January to August, narrower than the $3.643 billion gap recorded at end-July, the latest figures from the Bangko Sentral ng Pilipinas (BSP) showed on Monday.
The data shows the improvement was due to the payments surplus achieved in August.
Compared with the year earlier, the cumulative BOP deficit as of August showed a reversal of the $3.359 billion surplus in the corresponding 2013 period.
For August alone, the BOP yielded a surplus of $114 million, but the excess was far below the $501 million surplus recorded in July, even though it has sharply reversed the $318 million deficit incurred in August 2013.
The central bank traced the BOP surplus for August to lower payments by the national government of its maturing external obligation.
However, acknowledging the drop in surplus from July, BSP Deputy Governor Diwa Guinigundo told reporters in a briefing the lower BOP surplus was also due the continuing deficit in the foreign portfolio investments, or “hot money.”
“We will recall that in January to August 2013 net foreign portfolio investments was almost $2B, but in the first eight months of 2014, we had $567 million, still a shortfall,” he explained.
Guinigundo said the overriding reason for the lower hot money inflow during the period was the market reaction to the lure of the possible normalization of monetary policy in the US and its adverse impact on the local market.
“We suffered significant outflows of capital in the fourth quarter of 2013 moving on to the first quarter of 2014. At that time, we had more than a $4 billion deficit,” he added.
Viewing the second quarter alone, the country’s BOP position yielded a surplus of $330 million for the three-month period, narrowing by 68.3 percent from the $1 billion surplus recorded a year earlier.
The central bank said the lower quarterly surplus was due mainly to the net outflows (or net lending of Philippine residents to the rest of the world) in the financial account.
The financial account yielded net outflows of $912 million in the second quarter, lower than the $2.6 billion net outflows registered a year ago.
Meanwhile, the surplus in the current account during the quarter expanded, buoyed by the narrowing of the trade-in-goods deficit and the increase in the net receipts in the secondary income account.
The current account yielded a surplus of $3.1 billion (equivalent to 4.4 percent of the country’s gross domestic product) in the second quarter, rising by 41.5 percent relative to the $2.2 billion surplus in the same quarter last year.
The BOP summarizes the country’s economic transactions with the rest of the world over a certain period. It consists of the current account, the capital account, and the financial account.
For this year, the BSP is targeting a payments surplus of $1.1 billion, equivalent to 0.3 percent of the country’s gross domestic product. In 2013, the cumulative BOP stood at a surplus of $5.09 billion.