Reverses yr-earlier $450M deficit
THE Philippines recorded a balance of payments (BOP) surplus of $682 million in August, the highest surplus in five months and a turnaround from the deficit posted in the same month last year, driven mainly by net inflows in the financial account, central bank data released on Monday show.
The central bank said that the August BOP figures indicate that its full-year BOP surplus target of $2 billion is attainable, although an analyst from Fitch-owned Moody’s Analytics is somewhat skeptical about this given the weak performance of exports.
Data released by the BSP on Friday showed that the BOP surplus in August reached $682 million, reversing the $450 million deficit a year earlier and more than three times the $215 million surplus posted in July.
The August figure was also the biggest surplus in five months since March when the payments position was in surplus by $854 million, the central bank said.
“With a cumulative BOP for the eight months of $1.531 billion, the projection for full year is within reach,” BSP Governor Amando Tetangco Jr. said in a text message on Monday.
“The BOP surplus for the month of August was due to BSP’s foreign exchange operations and foreign exchange deposits of the national government which were only partly offset by payments of national government for maturing obligations,” Tetangco said.
In the first eight months of 2016, the surplus stood at $1.53 billion, or 3.5 percent lower than the $2.58 billion surplus achieved a year earlier.
Tetangco said the BSP continues to monitor global developments and market sentiment with regard to announcements of advanced economies’ central banks, including the US Federal Reserve, as these could lead to global portfolio rebalancing away from emerging market economies including the Philippines.
“Nevertheless, we don’t see any need to deviate from the current stance of keeping a market-determined exchange rate policy,” he said.
Explaining the drivers of the eight-month BOP surplus result, BSP Deputy Governor Diwa Guinigundo said “inflows came from sustained growth in cash remittances of 3 percent in January to July 2016 on top of higher business process outsourcing revenues and tourist receipts.”
Guinigundo said that foreign direct investment for the first six months also supported the BOP surplus by nearly 95 percent year-on-year while foreign portfolio flows rose by more than 3,300 percent from a negative $64 million in 2015 to more than $2 billion.
The BOP summarizes the country’s economic transactions with the rest of the world over a certain period. It consists of the current account, capital, and financial accounts.
The payments surplus last year reached $2.62 billion, reversing the $2.86 billion deficit recorded in 2014.
Weak exports ‘a drag’
Meanwhile, Moody’s Analytics associate economist Jack Chambers expects the BOP to fall slightly short of the $2 billion surplus target for 2016 given the ongoing weakness in merchandise exports.
“With global demand not expected to pick up significantly until 2017, export values will continue to be a drag. Compounding these demand-side pressures will be the recent closures of nickel mines following the audits, which will drag on exports of the commodity,” he explained.
BSP data showed that the merchandise trade account—exports and imports—posted a wider deficit of $16.39 billion from the deficit of $9.52 billion a year earlier.
Exports of goods fell to $20.7 billion in the first six months of 2016 from $21.8 billion in the same period last year, while imports of goods rose to $37.1 billion or by 18.3 percent from a year ago.
This brought the first-half current account surplus to $778 million, down 85.2 percent from the $5.25 billion surplus recorded a year earlier, due mainly to the widening of the trade-in-goods deficit or merchandise trade account, the BSP said.