BoP hits surplus, GIR up in October

THE country’s balance of payments (BoP) position hit a surplus of $1.5 billion in October, the Bangko Sentral ng Pilipinas (BSP) reported on Monday, snapping a six-month RUN OF DEfiCITS.

The result was a reversal from September’s $414-million shortfall and the year-earlier surplus of $711 million.

“The BoP surplus in October 2023 reflected inflows arising mainly from the national government’s (NG) net foreign currency deposits with the Bangko Sentral ng Pilipinas and the BSP’s net foreign exchange operations and net income from its investments abroad,” the central bank said in a statement.

The country’s BoP position remained positive year to date at a $3.25-billion surplus, also a reversal from the year-earlier deficit of $7.12 billion and improving from end-September’s $1.74-billion surplus.

“Based on preliminary data, this development reflected mainly the improvement in the balance of trade alongside the higher net inflows from personal remittances, trade in services and foreign borrowings by the NG,” the BSP said.

“Further, net inflows from foreign direct investments contributed to the surplus, albeit lower during the period,” it added.

Gross international reserves (GIR) likewise rose to $101.0 billion as of end-October from $98.1 billion a month earlier, the central bank also said.

This represents “a more than adequate external liquidity buffer equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income,” it added.

“[I]t ensures availability of foreign exchange to meet the balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans.”

The GIR level was said to be also equivalent to about 5.8 times the country’s short-term external debt based on original maturity and 3.7 times based on residual maturity.

Short-term debt based on residual maturity refers to outstanding external debt with an original maturity of one year or less, plus principal payments on mediumand long-term loans of the public

and private sectors falling due within the next 12 months.

Commenting on the results, China Banking Corp. chief economist Domini Velasquez said that service exports recently played a bigger role in the country’s balance of payments, compensating for some softening in merchandise trade.

“Next year, we expect the BoP to improve due to a general recovery of the global semiconductor industry, boosting Philippine merchandise exports,” she added.

Rizal Commercial Banking Corp. chief economist Michael Ricafort, meanwhile, said that proceeds from national government retail dollar bonds worth $1.26 billion also contributed to the surplus.

“[H]igher national government foreign debt partly led to the latest increase in the BoP and in the gross international reserves or GIR as well as some investment income from abroad,” he added.

“For the coming months, BoP data could still improve with the continued increase or growth in the country’s structural inflows.”