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Friday, March 29, 2024

Peso slips to 58.94 a dollar as BOP deficit reaches $7.8b

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The peso retreated Wednesday to 58.94 against the US dollar, near its record low, following reports that the balance of payments yielded a deficit of $2.3 billion in September on strong imports.

The local currency depreciated from 58.75 a dollar on Tuesday, but was still stronger than an all-time low of 59 registered this month.

Data from the Bangko Sentral ng Pilipinas showed that the BOP deficit in September was the largest in four years and wider than the $412-million shortfall registered in the same month last year as the government settled some of its foreign debt.

The deficit was the largest since it reached $2.69 billion in September 2018.

Nine-month BOP deficit also widened to $7.8-billion from the $665-million shortfall recorded in the same period last year.

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“Based on preliminary data, this cumulative BOP deficit reflected the widening trade in goods deficit as goods imports continued to surpass goods exports on the back of the persistent surge in international commodity prices and resumption in domestic economic activities,” the BSP said in a statement.

“The BOP deficit in September 2022 reflected outflows arising mainly from the Bangko Sentral ng Pilipinas’ net foreign exchange operations and the national government’s payments of its foreign currency debt obligations,” it said.

Data also showed that the gross international reserves fell to $93.0 billion as of end-September from $97.4 billion in August 2022. It was the lowest GIR since the $90.94 billion in April 2020. The BSP earlier vowed to temper large peso-dollar movements, an indication that it was active in the foreign exchange market using the reserves.

It said the latest GIR level still represented a more than adequate external liquidity buffer equivalent to 7.4 months’ worth of imports of goods and payments of services and primary income. This was down from almost 12 months of imports cover in 2020.

The GIR was also about 6.6 times the country’s short-term external debt based on original maturity and 4.0 times based on residual maturity.

The BSP raised the projected BOP deficit this year to $8.4 billion from the $6.3-billion shortfall in 2021, taking into consideration the further weakening of global demand. The projected BOP deficit would be equivalent to around -2.0 percent of the gross domestic product.

The Monetary Board approved the new set of 2022 and 2023 balance of payments projections during the Sept. 16, 2022 meeting. The BOP projections incorporate the latest available data and emerging developments.

It said the emerging BOP outlook over the near term remained subdued as external risks had intensified relative to the last forecast round in June 2022.

These risks of further downward revision in global growth prospects, record-high inflation print worldwide, more aggressive monetary policy tightening by major central banks, continued economic slump in China and lingering Ukraine-Russia conflict are expected to broadly weaken global demand conditions, and hence, the country’s external sector, it said.

“In particular, these are expected to moderate the growth in merchandise exports and, along with increased imports, will result in a further widening of the goods trade gap,” the BSP said.

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