THE country’s balance of payments (BoP) — which shows the Philippines’ economic transactions with the world for a certain time frame — reverted to a surplus in the second quarter, on the back of the narrowing of the current account deficit in the period, as well as continued net inflows in the financial account.
A report released by the Bangko Sentral ng Pilipinas (BSP) on Friday showed the country’s BoP position was at a $991-million surplus in the April-June period, a reversal of the $2-billion deficit booked in the same quarter last year.
“The surplus stemmed from the net inflows (i.e., net borrowing by residents from the rest of the world) in the financial account, albeit lower, mainly on account of the reversal of portfolio investments to net inflows and the sustained net inflows in the direct investment account,” the central bank said.
“The financial account continued to post net inflows on the back of the positive growth outlook as the country’s macroeconomic fundamentals remained stable. Meanwhile, the current account registered a lower deficit due to the narrowing of the trade-in-goods deficit combined with increased net receipts of trade-in-services, and in the primary and secondary income accounts during the quarter,” it added.
The report showed the country’s current account deficit narrowed 95.6% to $145 million in the second quarter versus the $3.284-billion shortfall logged a year ago.
The central bank said this was on the back of a lower trade deficit of $11.3 billion from $12.8 billion a year ago. Increased net receipts of trade-in-services ($3.3 billion from $2.2 billion), secondary income ($6.7 billion from $6.6 billion) and primary income ($1.2 billion from $712 million) also contributed to the improvement of the current account during the quarter.
Meanwhile, the capital account’s net receipts rose 15.4% to $18 million in the quarter from $16 million last year.
On the other hand, in the financial account, net borrowings of residents with the rest of the world dropped 86.6% to $225 million from $1.682 billion a year ago. This was due to the reversal of the other investment account to net outflows of $1.8 billion from net inflows of $48 million last year and the decline in net inflows of direct investments to$666 million from $2.7 billion. Meanwhile, portfolio investments reversed to net inflows of $1.3 billion in the quarter from a $1-billion net outflow in the same period last year.
For the first semester, the country’s BoP position stood at a surplus of $4.788 billion versus the $3.257-billion deficit booked in the comparable year-ago period.
The current account deficit in the first half narrowed to $1.741 billion from the previous year’s $3.756 billion, while the capital account registered net receipts of $33 million, higher than the $30 million booked last year.
Meanwhile, the financial account recorded higher net inflows of $5.719 billion in the first half from $2.536 billion the prior year.
Security Bank Corp. chief economist Robert Dan J. Roces said the first-semester BoP surplus shows the record-high reserves accumulated by the central bank.
“We continue to see positive fundamental inflows from higher net receipts. However these mask the negative on the current account which measures among others, trade-in-goods, which have been experiencing deficit,” he explained.
“On a positive note, our high capital account means we have enough forex (foreign exchange) reserves to stabilize the peso. Notwithstanding potential headwinds, as long as economic fundamentals stay robust and with the export sector potentially getting its much needed support, we are seeing a sustained surplus for the year,” Mr. Roces added. ““A pick-up in infrastructure spending for H2 will increase import demand for capital goods and raise the trade-in-goods deficit.”
The BSP expects the country’s BoP position to hit a surplus of $3.7 billion this year, a turnaround from the $2.306-billion deficit recorded in 2018. It sees the current account deficit at $10.1 billion by yearend, while the financial account is projected to end at a $5.2-billion net inflow.