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Thursday, March 28, 2024

BoP deficit ballooned to $3.26-billion in H1

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The peso closed at a new 12-year low of 53.53 against the US dollar Thursday, after the government announced that the balance of payments deficit ballooned to $3.26 billion in the first half from a shortfall of $706 million a year ago.

The Bangko Sentral ng Pilipinas said the country’s widening merchandise trade deficit was weighing on the BoP position, which represents the country’s foreign exchange transactions with the rest of the world.  Persistent BoP deficits eat into the country’s gross international reserves and affect the value of the peso against the US dollar and other major currencies.

“The higher cumulative BoP deficit for the period may be attributed partly to the widening merchandise trade deficit [based on the Philippine Statistics Authority’s preliminary data] for the first five months of the year that was brought about by the sustained rise in imports of raw materials and capital goods to support domestic economic expansion,” the Bangko Sentral said in a statement.

Data showed that in June alone, the BoP incurred a deficit of $1.18 billion, higher than the $569-million shortfall recorded in the same month last year.

Outflows in June stemmed mainly from foreign exchange operations of the BSP and payments made by the government for its maturing foreign exchange obligations.

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“These were partially offset, however, by net foreign currency deposits of the national government and income from the BSP’s investments abroad during the month,” the Bangko Sentral said.

The bank said the first-half BoP position was consistent with the gross international reserves level of $77.53 billion as of end-June 2018, which was down from a peak of $85.9 billion in September 2016.

“At this level, the GIR represents more than ample liquidity buffer and is equivalent to 7.5 months’ worth of imports of goods and payments of services and primary income. It is also equivalent to 6.2

times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity,” the Bangko Sentral said.

Data from the Philippine Statistics Authority showed that the country’s trade-in-goods deficit hit $15.76 billion in the first five months, up 55 percent from $10.164-billion deficit a year ago.  This was driven by strong imports led by higher cost of crude and petroleum products.

Imports in January to May increased 10.9 percent to $42.68 billion, while exports fell 5 percent to $26.9 billion.

The BoP summarizes the country’s economic transactions with the rest of the world, with a deficit indicating that foreign exchange payments are more than what the country receives.

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