BoP position swings to $3.1-billion surplus in Feb.

By Luisa Maria Jacinta C. Jocson, Reporter

THE PHILIPPINES’ balance of payments (BoP) position swung to a surplus in February, the Bangko Sentral ng Pilipinas (BSP) said on Wednesday.

Data from the BSP showed the BoP registered a surplus of $3.1 billion in February, a turnaround from the $4.1-billion deficit in January and $196-million gap in the same month a year ago.

This was also the first surplus in five months or since the $3.53-billion surfeit posted in September.

The BoP measures the country’s transactions with the rest of the world. A surplus shows that more money entered the Philippines, while a deficit means more funds left.

“The BoP surplus reflected the National Government’s (NG) net foreign currency deposits with the BSP which include proceeds from Republic of the Philippine global bonds, and net income from the BSP’s foreign investments,” the central bank said.

At its end-February position, the BoP reflected a final gross international reserve (GIR) level of $107.4 billion, higher than $103.3 billion as of end-January.

The dollar reserves were enough to cover 3.8 times the country’s short-term external debt based on residual maturity.

It was also equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income.

An ample level of foreign exchange buffers safeguards an economy from market volatility and is an assurance of the country’s capability to pay debts in the event of an economic downturn.

“It’s quite impressive to see such a significant turnaround in the BoP position,” Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said in a Viber message.

This indicates a “substantial improvement in the country’s economic activities,” he added.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the surplus in February can be largely attributed to the NG’s first global bond offering of the year.

In January, the NG raised $3.3 billion from the sale of 10-year and 25-year fixed-rate global bonds and seven-year euro sustainability bonds.

Mr. Ricafort also noted the continued gains in gold holdings as gold prices hit new highs. Foreign investments also showed gains amid higher prices of US Treasury bonds, he added.

Meanwhile, Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said the pause in the central bank’s easing cycle also supported the BoP surplus.

“We think it helped that the BSP did not cut rates last February. This likely attracted foreign flows into both the local bond and equity markets last month helping, in turn, mitigate the persistent deficits in the current account,” he added.

The Monetary Board last month opted to keep the key rate steady at 5.75% after three straight rate cuts last year.

Meanwhile, the country’s BoP position stood at a $992-million deficit in the first two months, slightly higher than the $936-million gap in the comparable year-ago period.

“Based on preliminary data, the year-to-date deficit reflected mainly the widening trade in goods deficit and net outflows from foreign portfolio investments but was partially offset by net receipts from foreign borrowings by the NG and personal remittances,” the BSP said.

Latest data from the local statistics authority showed the trade deficit widened to $5.09 billion in January from the $4.14-billion deficit in December, its widest gap in three months.

“The cumulative deficit for the first two months of the year suggests that there are still underlying challenges that need to be addressed,” Mr. Ravelas said.

“This mixed result highlights the importance of maintaining a balanced approach to economic policies to sustain positive trends while mitigating deficits,” he added.

This year, the BSP expects the country’s BoP position to end at a $2.1-billion surplus, equivalent to 0.4% of gross domestic product.