Bigger deficit in May widens BOP gap to $2 B in first 5 months

The central bank said balance of payments (BOP) deficit widened to $2.08 billion in the first five months of the year after registering a gap of $583 million in May.

Bangko Sentral ng Pilipinas (BSP) data show the monthly deficit is the biggest recorded for 2018 so far.

In a statement late Tuesday, the BSP said the higher cumulative BOP deficit for the period “may be attributed partly to the widening merchandise trade deficit (based on Philippine Statistics Authority preliminary data) for the first four months of the year that was brought about by the sustained rise in imports of raw materials and capital goods to support domestic economic expansion.”

In the meantime, the $583-million BOP shortfall for the month of May is higher than the $270 million in April and the $59 million same time in 2017.

“Outflows in May stemmed mainly from foreign exchange operations of the BSP and payments made by the National Government (NG) for its maturing foreign exchange obligations,” the BSP said. “These were partially offset, however by net foreign currency deposits of the NG and income from the BSP’s investments abroad during the month.”

The overall BOP deficit projection has been raised to $1.5 billion from $1 billion for this year. The current account is expected to hit $3.1-billion deficit versus an earlier estimate of only $700 million due to the wider trade gap.

The BSP maintained that it is comfortable with the level of the country’s gross international reserves (GIR) which it said remains consistent with BOP numbers. The final GIR level as of end-May is $79.20 billion.

BSP Governor Nestor A. Espenilla Jr., in a presentation to Japanese investors Tuesday in Tokyo, said the “Philippines’ external payments position remains very manageable and we have built sufficient liquidity buffers against global headwinds.”

The projected BOP deficit for 2018 is only 0.4 percent of GDP while the current account deficit is about 0.9 percent.