Balance of payments swings to deficit

THE COUNTRY’S external payments position swung to a wider deficit in October to hit a threemonth peak amid increased debt payments and foreign currency fluctuations, the Bangko Sentral ng Pilipinas (BSP) said yesterday.

The Philippines’ balance of payments (BoP) posted a $368-million deficit last month, reversing the $24-million surplus in September and about double the $183-million gap posted in October 2016.

The latest print also clipped two months of an uptrend, and is the widest deficit posted since July’s $678 million, 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.

The October tally brought the year-to-date BoP position to a $ 1.735- billion deficit, a turnaround from the $ 1.465- billion surplus posted during the comparable period in 2016.

The current figure is substantially wider than the $ 500- million deficit expected by the central bank for the full year.

In a statement, the central bank attributed the larger deficit to payments made by the national government for its maturing external debt, coupled with the BSP’s foreign exchange operations.

“These were partially offset by the national government’s net foreign currency deposits and income from the BSP’s investments abroad,” the BSP said.

The peso averaged at P51.3433 against the dollar last month to hit fresh 11-year-lows, hovering above P51 during the daily trading sessions. BSP Governor Nestor A. Espenilla, Jr. said that the central bank conducts “tactical operations” in order to temper sharp swings in the daily exchange rate.

The country’s foreign currency reserves totalled $ 80.419 billion as of end- October, the bulk of which is composed of the BSP’s income from offshore investments which reached $65.257 billion.

The BSP sometimes taps the reserve fund to influence in the daily peso-dollar trading by buying or selling more units to influence the exchange rate.

Bank analysts have pointed out that the widening current account deficit, which makes up the bulk of the country’s external position, has been affecting market sentiment towards the Philippines. However, Mr. Espenilla has said the deficit simply illustrates increased importations which has been supporting more upbeat domestic activity as the Philippine economy continues to expand.

Gross domestic product grew by 6.9% during the third quarter led by gains in the manufacturing and services sectors, according to the Philippine Statistics Authority.