The central bank said it believes the recovery achieved by the country’s balance of payments (BOP) position in July will not negatively impact the strength of the local currency in the coming months.
The Bangko Sentral ng Pilipinas (BSP) comment was in reaction to a joint report from First Metro Investments Corp. and the University of Asia and the Pacific which projected that the Philippine peso may depreciate in the coming months as the US dollar strengthens and the BSP rebuilds its international reserves.
“We don’t expect that the recovery in the balance of payments should lead to a weakening of the domestic currency,” BSP Deputy Governor Diwa Guinigundo said in a text message.
Guinigundo was referring to the $501 million payments surplus recorded for July, a reversal of the $24 million deficit posted in June. This has led to a narrowing of the cumulative BOP deficit for the first seven months of the year to $3.64 billion.
The BSP official explained that more dollar inflows would allow the central bank to manage its international reserves as a buffer to external shocks without any collateral impact on the stability of the peso.
“It remains a tight balancing act on the part of the BSP, which remains focused on promoting price and financial stability,” he said.
The balance of payments 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 the full year, the BSP is targeting a payments surplus of $1.1 billion, equivalent to 0.3 percent of the country’s gross domestic product. The central bank said that the BOP surplus target is still attainable despite the country’s cumulative BOP position remaining in deficit as of July.