The Philippines posted a higher balance of payments (BOP) deficit of $4.078 billion in January this year, more than the shortfall last December of $1.508 billion, as the government paid its maturing foreign debts during the period, depleting the country’s US dollar reserves.
In a statement, the Bangko Sentral ng Pilipinas (BSP) said the deficit widened last month due to “drawdowns by the national government on its foreign currency deposits with the BSP to meet its external debt obligations.” The central bank also attributed the outflows to its net foreign exchange operations.
The January BOP deficit is higher compared to January 2024’s $740 million.
The BOP is a summary of the economic transactions of a country with the rest of the world for a specific period. A BOP surplus position means there are more exports or inflows than imports or outflows, while a deficit position is the opposite.
Meanwhile, the BSP released the final amount of gross international reserves (GIR) for end-January of $103.271 billion, lower than end-December’s $106.256 billion. The BSP announces the GIR level as preliminary data and as final data along with the BOP.
The BSP considers the latest GIR level as more than adequate external liquidity buffer, but the BOP position “reflects a decrease in the final GIR.”
Despite being lower than previous, the reserves still “ensures availability of foreign exchange to meet BOP financing needs.” It is also BSP’s war chest against speculative attacks on the peso in the exchange rate market.
The GIR is equivalent to 7.3 months’ worth of imports of goods, and payments of services and primary income. It is 3.7 times the country’s short-term external debt based on residual maturity or external debt that will mature in the next 12 months.
In 2024, the BOP position ended the year with a lower-than-expected surplus of $609 million because of the higher trade deficit and foreign loans. The BSP had projected a $3.5 billion BOP surplus for 2024.
For this year, the BSP expects the BOP will be in surplus of $2.1 billion. The BOP outlook “remains resilient albeit downside risks dominate,” said the central bank.
The factors affecting the BSP’s BOP projections are the stable yet moderating global and domestic economic growth prospects; the slowing inflation trajectory across countries; the lingering geopolitical and weather shocks; and possible shifts in US trade and investment policies under the Trump administration.