The balance of the country of The payments deficit (BoP) widened in November as the government increased foreign debt repayments, the Bangko Sentral ng Pilipinas (BSP) said Thursday.
Central bank data shows the BoP position widened to a deficit of $2.276 billion in November, compared to a deficit of $216 million a year ago. It also more than tripled from October’s $724 million deficit.
November also marked the largest deficit in 26 months or since September 2022’s $2.339 billion deficit.
The BoP measures a country’s transactions with the rest of the world at a given point in time. A deficit means that more money left the economy than came in, while a surplus shows that more money came into the Philippines.
“The BoP deficit in November 2024 reflected the net withdrawals of foreign currency by the National Government (NG) from its deposits with the BSP to service its foreign currency debts and pay its various expenses, and the net foreign exchange transactions of the BSP,” the report said.
Previous data from the BSP showed that the Philippines’ debt burden fell 3.8% to $8.68 billion from January to August.
Outstanding foreign debt reached a record $130.182 billion at the end of June. This brought the ratio of external debt to gross domestic product (GDP) to 28.9% at the end of the second quarter.
In the first eleven months, the BoP had a surplus of $2.117 billion, 30% lower than the surplus of $3.03 billion in the same period a year earlier.
“Based on preliminary data, the decline in cumulative BoP surplus was due to lower net services trade receipts and NG net foreign borrowing,” the central bank said.
The country’s trade deficit increased 36.8% year on year to $5.8 billion in October, the largest trade deficit in 26 months or since August 2022, data from the local statistical authority showed.
During the first ten months, the trade deficit increased by 3.6% to $45.22 billion, compared to the $43.64 billion deficit a year ago.
“However, this decline was partly tempered by continued net inflows from personal remittances and from net foreign portfolio and direct investment,” the BSP added.
In the first ten months, remittances grew 3% to $28.3 billion, compared to $27.49 billion a year earlier.
During the same period, BSP-registered foreign investments generated net inflows of $2.49 billion, a reversal from 2023’s outflows of $715.43 million.
Meanwhile, net foreign direct investment (FDI) inflows rose 3.8% to $6.66 billion in the first nine months, compared to $6.42 billion a year ago.
At end-November levels, the BoP reflected a final gross international reserve (GIR) of $108.5 billion, down 2.3% from $111.1 billion at end-October.
Dollar reserves were enough to cover 4.3 times the country’s short-term foreign debt, based on remaining maturity.
It also corresponds to 7.7 months of imports of goods and payments for services and primary income.
An ample level of foreign exchange buffers protects an economy from market volatility and guarantees the country’s ability to service debt in the event of an economic downturn.
This year, the BSP expects the country’s BoP position to end at a surplus of $2.3 billion, equivalent to 0.5% of GDP.
Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said the depreciation of the peso had an impact on the net payment of foreign debt maturities.
The peso fell twice in November to a record level of P59 per dollar.
“In the coming months, the country’s GIR and BoP may continue to be supported by continued growth in the country’s structural inflows from OFW (overseas Filipino workers) remittances, BPO revenues, exports and a relatively quick recovery in revenues from foreign tourism,” he said. said Ricafort.
He said further fundraising activities, such as issuing global bonds, could also strengthen the BoP’s position.
Finance Minister Ralph G. Recto has said they want to issue dollar and euro bonds in the first half of 2025.
“So a still relatively high GIR of $108.5 billion could still strengthen the country’s external position, which is a key pillar for the country’s continued favorable credit ratings,” Mr. Ricafort said. — Luisa Maria Jacinta C. Jocson