The country’s balance of payments registered a deficit of $678 million in July, the largest in three months, as foreign fund outflows continued to exceed inflows.
Data from the Central Bank showed that the July deficit was also a reversal of the $215-million surplus booked a year ago.
This brought the balance of payments position in the first seven months to a deficit of $1.384 billion, a turnaround from the $848-million surplus in the same period last year.
“The higher deficit was attributed to foreign exchange operations of the BSP and to payments made by the national government for its maturing foreign exchange obligations during the review month,” Bangko Sentral said in a statement.
Outflows for the month, however, were partially tempered by net foreign currency deposits of the national government and Bangko Sentral’s income from investments abroad.
“BSP’s foreign exchange operations remained driven by increasing market demand for FX largely to finance capital goods imports,” it said.
Bangko Sentral said it was expecting that the recovery of merchandise exports and higher-than-expected overseas remittances and business process outsourcing revenues would mitigate the current account and the overall balance of payments deficits this year.
Bangko Sentral expects the balance of payments to post a $500-million shortfall this year, a revision of the previous estimate of a $1-billion surplus.
BoP summarizes the country’s economic transactions with the rest of the world, with a deficit indicating that foreign exchange payments exceed inflows. A BoP deficit affects the value of the peso against the US dollar and eats into the country’s gross international reserves.
Bangko Sentral Governor Nestor Espenilla Jr. said the shortfall in current account”•one of the main components of the balance of payments”•was expected to “persist” due to increasing imports amid the expanding economy.
“The recent reversal of the current account to deficit is attributed to higher imports of capital goods as well as raw materials and intermediate goods and consumer products. This broad-based import mix reflects sustained expansion in the domestic economy,” Espenilla said.
“This trend is expected to persist as investment growth accelerates in line with the expansion of the economy,” he said.