BoP gap widens in June

THE COUNTRY saw more dollar outflows in June to post the widest gap in over a year, the Bangko Sentral ng Pilipinas (BSP) reported yesterday.

The Philippines’ balance of payments (BoP) position widened to a $1.177-billion deficit in June, double the $ 583- million gap posted in May and the $569 million gap a year ago. The June tally is the widest since a $1.671-billion deficit posted in November 2016, according to central bank data.

The BoP measures the country’s transactions with the rest of the world at a given time. A deficit means more funds fled the economy than what went in, while a surplus shows that more money entered the Philippines.

June outflows sustained six straight months of a deficit in external payments.

“Outflows in June 2018 stemmed mainly from foreign exchange operations of the BSP and payments made by the national government for its maturing foreign exchange obligations,” the central bank said in a statement.

In contrast, net foreign currency deposits as well as a steady stream of income from the BSP’s offshore investments helped offset the outbound amounts.

The BSP taps into its dollar reserves to smoothen any sharp swings in the peso-dollar rate, as part of its “tactical intervention” to keep the currency competitive. The local unit traded above the P53 level against the greenback last month, touching a fresh 12year low to average P53.0476.

The June print brought the first- semester BoP tally to a $ 3.257- billion deficit, substantially wider than the $706-million gap logged in the same period in 2017.

The wider trade deficit is expected due to a sustained imports surge, but is propped up by service-related inflows and by the entry of more foreign capital. These imports will later on “support domestic economic expansion,” the BSP said.

Sought for comment, an economist said the wider gap in external trade is not all bad as it will fuel economic growth, although financial markets may respond differently.

“This deficit is an investment in higher economic growth trajectory for the Philippines at this juncture. It may be a different story altogether if it drags on and no positive results are seen,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines.

The BSP sees a $ 1.5- billion BoP deficit this year, wider than the $1-billion gap pencilled in December and from the $863-million actual deficit logged as of end-2017. Still, the level is seen “manageable” equivalent to 0.4% of gross domestic product.