The country’s balance of payments (BOP) reverted to negative territory at the start of the year, marking the biggest shortfall since 2014, the Bangko Sentral ng Pilipinas (BSP) reported on Friday.
Officials said this was due to government debt servicing, central bank foreign exchange operations and a net hot money outflow. Analysts echoed the view and added that the deficit could also be traced to a widening trade gap and lower remittances.
The January BOP deficit of $813 million was a reversal from December 2015’s $481-million surplus and the $136-million surplus recorded in January last year. It was also the biggest deficit since January 2014’s $4.480 billion.
“The $813-million BOP deficit in January was largely due to payments by the national government for its maturing foreign exchange obligations and results of foreign exchange operations of the BSP,” central bank Deputy Governor Diwa Guinigundo told reporters in a text message.
Contributing to the deficit was P129.85 million in net outflows for central bank-registered foreign portfolio investments, Guinigundo noted.
Central bank Governor Amando Tetangco Jr. said the outflows were offset by “foreign exchange inflows from foreign exchange deposits by the national government and income from BSP’s investments abroad.”
“We see this as temporary and expect to see a turnaround later this year, given steady remittances and receipts from the business process outsourcing sector, “ Tetangco said.
Bank of the Philippine Islands (BPI) vice president and lead economist Emilio Neri Jr. said much like the rest of Asia, there was a net outflow of funds in the Philippines stock market that possibly outweighed a net inflow from the current account.
BPI associate economist Nicholas Antonio Mapa said the shortfall could be traced to a lower current account surplus as the trade deficit continued to expand. He added that “the secondary income account or remittances is no longer able to provide the same lift as it did in the past.”
Trade and remittances data for January are expected to be released next month.
“We may expect BOP surpluses in the next few quarters but perhaps smaller surpluses as the trade deficit narrows and remittances continue to flow,” Mapa said.
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 account and the financial account.
The BOP position ended in positive territory last year at a $2.616-billion surplus, rebounding from the deficit posted in 2014. It was the biggest surplus since 2013’s $5.085 billion.
The central bank expects the overall BOP position to ease to a $2.2-billion surplus this year, with an anticipated lower current account surplus to be partially offset by a financial account rebound to a small net inflow.
The 2016 current account was forecast to be in surplus at $5.7 billion due mainly to an expected surge in imports. The capital account is expected to expand by 0.1 percent, while the financial account could likely hit a net inflow of $400 million.