BOP deficit shrinks in August to $7 million

The country’s balance of payments (BOP) deficit has narrowed to $7 million for the month of August versus $678 million in the previous month, data from the Bangko Sentral ng Pilipinas (BSP) show.

In a statement, the BSP said “outflows during the month (August) were largely offset by the NG’s (National Government) net foreign currency deposits and the BSP’s income from its investments abroad.”

It said the lower shortfall “also reflected the thin trading of portfolio investments during the “ghost” month (August 22 to September 19).”

For the January-August period, the BOP deficit stood at $1.391 billion, it’s the highest cumulative deficit for the year. In the same period last year, the BSP also recorded a deficit of $1.531 billion.

According to the central bank, the eight-month cumulative deficit was “largely accounted for” by portfolio investment outflows which reached $319 million during the period, compared to a $2.1-billion net inflows same time in 2016.

The BSP said several factors led to the fund outflows such as the US Federal Reserve interest rate hike, global terrorism concerns, and closure orders for some mining companies in the country.

The BSP also pointed out that trade balance has improved. As of end-July, the Philippine trade deficit amounted to $14.7 billion compared to same time last year of $15.4 billion.

“The growth of merchandise exports at 13.8 percent outpaced that of merchandise imports at 7.9 percent. It may also be noted that the trade deficit also reflected increased percent share to total imports of raw materials and intermediate goods at 38.6 percent, and capital goods imports at 32.4 percent, indicating continued expansion in domestic economic activity,” it stated.

The BOP is the summary of the economic transactions of a country with the rest of the world for a specific period.

It serves as an accounting statement on the economic dealings between residents of the country and non-residents.

A BOP is in shortfall position if a country have more payments made out compared to the amount that is coming in as inflows.

For 2017, the BSP expects a BOP deficit of $500 million, a little more than actual 2016 deficit of $420 million.

The $7-million monthly deficit recorded in August is the smallest so far this year. The highest monthly deficit was in April of $917 million.

The central bank changed its external account assumptions midyear in anticipation of higher imports as well as other external factors that would impact on BOP such as rising US interest rates and the uneven global growth.