THE country’s balance of payments (BoP) position remained in negative territory in January, but the gap narrowed significantly than the year-earlier and December figures, central bank data on Monday showed.
The BoP yielded a deficit of $9 million last month, from an $813-million gap a year earlier and $214 million in December 2016.
The Bangko Sentral ng Pilipinas (BSP) said the payments deficit in January carried over carryover the negative sentiment from December.
IHS Markit senior economist Rajiv Biswas noted that while the deficit in January was small it reflected a deteriorating BoP position that has been evident since 2016.
“The BoP has shifted from a surplus of $2.6 billion in 2015 to a modest deficit of $420 million in 2016. The worsening BoP has resulted from a large deterioration in the current account, which is estimated to have narrowed sharply in 2016 from a surplus of $7.7 billion in 2015,” he said.
The central bank do not have the trade, services and financial components yet, but the headline numbers indicate that debt payments by the national government and the foreign exchange operations of the BSP brought about the small deficit during the month, BSP Deputy Governor Diwa Guinigundo said in a text message to reporters.
Nevertheless, he said, some partial offsets were seen in the national government’s foreign exchange deposits as well as BSP’s income from investments abroad.
“We expect a turnaround during the year on account of the country’s continued resilience and strong macroeconomic fundamentals,” he said.
The BSP is forecasting a $1-billion BoP surplus this year, an estimate that is expected to contribute 0.3 percent to the gross domestic product and reverse the $420 million deficit for the whole of 2016.
Imports are likely to continue to grow strong, boosted by buoyant growth in private consumption, the impact of higher oil prices and the depreciation of the peso against the US dollar, Biswas said, reflecting on the rapid growth forecast on the economy at 6.3 percent.
IHS Markit estimates that the average price of Brent crude will rise from $44 in 2016 to $58 in 2017. The Philippine economy is dependent on imported oil, a situation that is expected to push oil imports higher, Biswas noted.
“A key concern is that the value of electronics exports, which account for around half of the merchandise exports of the Philippines, has remained stagnant. Despite the upturn in the global electronics cycle over the past six months and signs of sharply higher electronics exports from other East Asian economies, electronics exports from the Philippines showed zero growth in calendar 2016,” he said.
Consequently, Biswas noted the Philippines is likely to face another weak BoP position this year, even if the overall external account position remains resilient due to strong remittances from overseas Filipinos and business process outsourcing companies.