Narrows from June and year-earlier; but erases 7-month 2014 deficit
THE Philippines posted a payments surplus in July for the second straight month, although the surplus narrowed by 27 percent from the previous month and by 29 percent from the year-ago level due to external debt payments by the national government.
Data released by the Bangko Sentral ng Pilipinas (BSP) on Wednesday showed a balance of payments (BoP) surplus of $354 million in July, contracting from a $485 million surplus in June and from a $501 million surplus posted in July 2014.
BSP Deputy Governor Diwa Guinigundo said in a text message to reporters on Wednesday the July surplus was moderated by the national government’s external debt payments.
Tracing the factors that kept the BoP in positive territory, the central bank pointed to the central bank’s various foreign exchange operations, which included investments abroad and foreign exchange deposits from the national government.
“This was made possible by sustained foreign exchange inflows from remittances, BPOs [business process outsourcing]and foreign portfolio investments,” Guinigundo said.
The 7-month positive swing
The surplus from July, although smaller than previous levels, provided additional boost to the seven-month BoP position, driving it up to a $2.04 billion surplus as of end-July from a six-month surplus of $1.68 billion. The end-July position reflected a swing into positive territory from a deficit of $3.64 billion in the comparative period in 2014.
The seven-month surplus not only reversed the year-earlier deficit but also exceeded the full-year 2015 target surplus of $2 billion, Guinigundo said.
Cautious optimism remains
Going forward, the central bank said it will still take a cautiously optimistic stance toward its BoP goal this year as it considers the expected lift-off in US interest rates and the volatility in the foreign exchange markets fueled by the devaluation of both the Chinese yuan and the Vietnamese dong.
“This cautious optimism owes to the strong fundamentals of the Philippine economy and the structural flows that have proven to be resilient,” the BSP deputy governor said.
An analyst from the Bank of the Philippine Islands (BPI) said despite the contraction in the July surplus, the BOP is likely to remain in positive territory by year-end on the back of a strong current account surplus, which is likely to be driven by sustained remittance flows.
“In good times and in bad times, remittances have flown back to the Philippines. Despite a projected capital outflow due to the imminent Fed rate hike, dollar liquidity through the remittances channel can help bring us to an overall BOP surplus for the year,” Nicholas Antonio Mapa, BPI associate economist said.