May sees a decrease in balance of payments deficit to $439M

The inflow of remittances, investments, and borrowings significantly reduced the country’s balance of payments (BOP) deficit to $439 million in May, compared to $1.6 billion in the same month last year, as reported by the Bangko Sentral ng Pilipinas (BSP).

However, the BOP deficit in May was three times larger than the $148 million deficit in April, primarily due to national government spending, including payment of foreign obligations.

“The BOP deficit in May 2023 reflected outflows arising mainly from the national government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP stated.

The latest data brought the surplus for the first five months of the year to $2.87 billion, indicating that more money came into the country than went out. This marks a turnaround from the $1.53 billion deficit recorded in the same period last year.

“Based on preliminary data, this cumulative BOP surplus was partly attributed to net inflows from personal remittances, net foreign borrowings by the NG, trade in services, and foreign direct investments,” the BSP explained.

Foreign Exchange Reserves

Meanwhile, the gross international reserves (GIR) at the end of May stood at $101.6 billion, higher than the preliminary figure of $101.3 billion reported earlier in June and close to the $101.8 billion recorded in April.

GIR Maintained Above $100B in April, Reports BSP

The BSP stated that the current GIR level represents a more than adequate external liquidity buffer, equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income.

The GIR is also about 5.8 times the country’s short-term external debt based on original maturity and 4.1 times based on residual maturity.

Widest Deficit Since February

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., mentioned that the BOP deficit in May was the widest in three months, since the $895 million deficit observed in February.

Ricafort stated that the BOP data could continue to improve due to the ongoing growth in US dollar inflows, such as remittances from overseas Filipino workers, revenues from business process outsourcing, foreign direct investments, exports, and foreign tourism receipts.

Further support could come from “the further narrowing of the country’s trade deficit amid the recent decline in world prices of crude oil and other imported commodities,” he added.

Last week, the BSP revised its full-year BOP deficit forecast for 2023 to $1.2 billion, down from the previous forecast of $1.6 billion, citing the slower global activities.

BSP Reduces 2023 BOP Deficit Forecast to $1.2B

In particular, the deficit in the trade of goods is expected to be smaller this year as both exports and imports decrease due to falling commodity prices. Additionally, the growth in remittances from overseas-based Filipinos is expected to continue due to steady demand for Filipino workers amid a labor shortage in destination countries. INQ

 

Reference

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