The monetary authorities on Tuesday reported a surplus in the balance of payments (BOP) totaling $501 million for the month of July, representing a sharp reversal from a shortfall in June, when the economy spent far more foreign currency than it earned during the month.
The BOP surplus in July augurs well for the $270-billion economy looking to end the year with a BOP surplus in excess of $1 billion.
Based on data from the Bangko Sentral ng Pilipinas (BSP), the surplus was the widest yet since November last year, when the balance stood as a surplus amounting to $837 million.
According to the BSP, the country’s foreign-currency earnings proved more than enough to cover the foreign-currency expense demanded for the period.
Likewise, this was a reversal from a $24- million deficit reported the previous month.
“You have some foreign-exchange deposits by the national government. And then you have the foreign-exchange operations of the BSP and income from foreign investments,” central bank governor Amando M. Tetangco Jr. said of the BOP surplus at the sidelines of the Development Budget Coordination Committee’s (DBCC) 2015 budget proposal presentation to the Senate on Tuesday.
The interagency DBCC is responsible for crafting and developing the macroeconomic blueprint from which the country’s economic managers execute their plan of action.
While the central bank welcomed the surplus as a positive development in the market, the July BOP surplus represent a shortfall from a $1.1-billion surplus in the same month last year.
As a result, the BSP reported a seven-month BOP reflecting a shortfall several billion dollars wide. Nevertheless, the shortfall proved significantly lower compared to the deficit reported at the start of the year.
The aggregate BOP deficit in the first seven months exceeded $3 billion for the first time this year, totaling $3.64 billion as of end-July. This was lower than the $4.5-billion deficit reported at the start of the year. Still, this was a reversal from the $3.67-billion surplus reported in the first seven months last year.
The DBCC anticipates a surplus in the balance of payments this year as wide as $1.1 billion.
This means that for the country to achieve this level of surplus, the Philippines must post an average monthly surplus of $948 million.
The BOP consists of the current account, or the transactions in goods services and income; the capital account, or the capital transfers of nonfinancial assets; and the financial account, or the transactions that involve financial asset such as stocks and derivatives.
Foreign portfolio investments—one of the BOP components under the financial accounts— is still in the reds after posting a $1.09-billion net outflow in January to July this year.
“We do not have the data on the current account yet, we only have up to March but it is expected to continue to be in surplus,” Tetangco, meanwhile, said.
Written by: Bianca Cuaresma