THE central bank is confident that the country’s balance of payments (BOP) position, which slipped back into a deficit in June, will return to a surplus in the remaining months of the year on the back of strong growth in exports and remittances.
“The expectation is that there is going to be an improvement in the BOP position in the rest of the year, particularly as a capital flows come back,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. told reporters on Tuesday.
Tetangco said the improvement in the payments position will be supported by the expected positive performance of one of its major components—the current account.
“It is expected that the current account will be in surplus mainly because of the increase in exports and remittances. So current account is still in surplus, [while]the capital account we expect it to improve in the rest of the year,” he said.
Latest BSP data show that personal remittances from overseas Filipino workers in May rose 5.5 percent year-on-year to $2.1 billion, while cash remittances coursed through banks grew 5.4 percent year-on-year to $2 billion. Meanwhile, total export earnings in May rose by 6.9 percent to $5.483 billion from $5.131 billion a year earlier.
Central bank data show that the country recorded a $24 million payments deficit in June, reversing the $373 million surplus posted in May as well as the surplus of $692 million recorded a year earlier.
For the first six months, the cumulative payments position registered a deficit of $4.14 billion, slightly wider than the $4.12 billion deficit recorded in the five months to May.
The BSP said the payments deficit widened in June due to the debt service requirements of both the national government and the central bank.
“There were some inflows but not sufficient to offset the impact of debt servicing. Usually, June is a month when you have a relatively heavy debt service requirement,” Tetangco said.
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. The new BOP target, announced early this month, is much lower than the $3 billion forecast set in December 2013 as the central bank took into consideration expectations of a wider trade deficit and continued uncertainty in financial markets.
The Philippines recorded a BOP surplus of $5.09 billion in 2013.