BOP gap in February biggest in two years

The Philippines incurred its biggest monthly balance of payments (BOP) deficit in more than two years as the shortfall reached $2.02 billion in February, reversing the $839 million surplus recorded in the same month last year, according to the Bangko Sentral ng Pilipinas (BSP).

The latest BOP deficit was the largest since the $2.69 billion shortfall booked in September 2018.

The BSP said the shortfall last month reflected outflows, arising mainly from the central bank’s reserves management operations and the foreign currency withdrawals by the national government from its deposits with the BSP to pay its foreign currency debt obligations.

The outflows, the BSP explained, were partly offset by the inflows from the central bank’s foreign exchange operations and income from its investments abroad.

This was the second straight month the country’s external payments position was in the red.

In all, the Philippines posted a BOP deficit of $2.77 billion in January and February, 5.4 times the $516 million shortfall recorded in the first two months of 2020.

“Based on preliminary data, this cumulative BOP deficit was due largely to the national government’s net repayments of its foreign loans and the country’s merchandise trade deficit,” the BSP said.

The BOP is the difference in total values between payments into and out of the country over a period. A deficit means more dollars flowed out of the country to pay for the importation of more goods, services, and capital that what came in from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing earnings and tourism receipts.

The country’s BOP surpluses have been piling up since April last year until it ended 2020 with a record surplus of $16.02 billion as the country borrowed heavily to cushion the impact of the pandemic on the economy.

Foreign borrowings by the national government approved by the BSP soared by nearly 83 percent to $17.7 billion last year from $9.7 billion in 2019 to beef up the country’s war chest against the health crisis.

Zeno Ronald Abenoja, senior director of the

BSP’s Department of Economic Research, earlier said the country’s BOP surplus may moderate this year after a recent peak, while the GIR level is expected to soar.

The central bank is looking at a better BOP surplus of $6.2 billion or 1.6 percent of gross domestic product (GDP) this year and $3.8 billion or 0.9 percent of GDP for next year.

“On balance, the latest BOP assessment for 2021 reflects optimism amid expectations of gradual strengthening of the economy anchored mainly on positive developments on the rollout of COVID-19 vaccines, better-than-anticipated global growth momentum and continued strong government support to stimulate recovery,” Abenoja said.

While the 2021 external account figures are projected to post improvements given brighter prospects globally and domestically, Abenojas said the outcomes are expected to remain below pre-COVID levels in nominal terms.

“The risk of surging infections amid emergence of new and more transmissible variants of the virus coupled by slow vaccine deployment could cast a shadow on the projected recovery path as these could continue to restrict movement of people, goods and services,” Abenoja said.