BOP swings to deficit in January

The country’s balance of payments (BOP) swung to a deficit of $740 million in January, the highest in almost a year, as the government paid its foreign currency debt obligations.

Latest data from the Bangko Sentral ng Pilipinas (BSP) showed that the January BOP recorded a deficit of $740 million, a reversal of the $3.08 billion surplus in the same month in 2023.

This is also the widest shortfall in close to a year or since the $895 million recorded in February 2023.

According to the central bank, the BOP deficit last month is a reflection of the outflows arising mainly from the government’s payments of its foreign currency debt obligations.

The BOP is the difference in total values between payments into and out of the country over a period. It is also a measure of the country’s cash flow statement with the rest of the world.

A deficit means that more dollars flowed out to pay for the importation of more goods, services and capital than what came in from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing (BPO) earnings and tourism receipts.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., said this could also be attributed to the continued trade deficit.

Moving forward, Ricafort said the BOP data could still improve, driven by the proceeds of the government’s planned global bond issuances in the first quarter and other official development assistance.

The sustained growth in OFW remittances, BPO revenues, foreign tourism receipts and other structural dollar inflows of the country will also fuel BOP, he said.

Ricafort added that the lower global oil and food prices could help narrow the country’s net imports and trade deficit.

Meanwhile, the BSP reported that the country’s gross international reserves (GIR) level slipped to $103.3 billion as of end-January from $103.8 billion in December last year.

The central bank maintained that the foreign exchange buffer represents a more than adequate external liquidity buffer equivalent to 7.7 months’ worth of imports of goods and payments of services and primary income.

It is also about six times the country’s short-term external debt based on original maturity and 3.9 times based on residual maturity.

“Any improvement in BOP and GIR could help provide greater cushion for the peso exchange rate versus any speculative attacks and help strengthen the country’s external position,” Ricafort said.