By means of Luisa Maria Jacinta C. Jocson, Reporter
THE COUNTRY posted a balance of payments deficit of $724 million in October after the government defaulted on foreign debt, the Bangko Sentral ng Pilipinas (BSP) said.
This was a reversal from the $1.51 billion surplus a year ago and the $3.526 billion surplus in September.
“The BoP deficit in October 2024 reflected the net withdrawal of foreign currency by the national government (NG) from its deposits with the BSP to service its foreign currency debt and pay its various expenses,” the BSP said in a statement declaration.
The BoP summarizes the country’s transactions with the rest of the world. A deficit means that more money is leaving the country, while a surplus shows that more money is coming in.
The latest data from the Bureau of the Treasury (BTr) shows that NG’s outstanding debt rose to a record high of P15.89 trillion as of end-September.
The majority (68.81%) of debt came from domestic sources, while the remainder came from foreign creditors.
External debt rose 9.3% to P4.96 trillion at the end of September from a year ago.
Central bank data showed the BoP reflected a final gross international reserve (GIR) of $111.1 billion at the end of October, up from $112.7 billion a month earlier.
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said that despite the decline, the reserve level has been above the $100 billion mark for more than a year or thirteen consecutive months.
“Still a relatively high GIR, the second highest on record, partly reflecting the BSP’s net foreign investment income, amid gains in most global financial markets recently on market expectations of the series of rate cuts by the Fed between 2024 and 2026,” he added.
The US Federal Reserve started its rate-cutting cycle in September with a half-percentage point cut and cut another quarter of a percentage point earlier this month.
Markets are anticipating another quarter-point rate cut at the last meeting of the year in December.
Central bank data showed the dollar buffer was enough to cover 4.4 times the country’s short-term foreign debt, based on remaining maturity.
It also corresponded to eight 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.
Mr Ricafort said the October deficit was due to the country’s persistent trade deficit.
The Philippines’ goods trade deficit stood at $5.09 billion in September, the largest deficit in 20 months.
The country’s trade balance in goods has been in the red for more than nine years, since a $64.95 million surplus in May 2015.
Mr. Ricafort also noted that there is volatility due to geopolitical risks and the market pricing of the new Trump administration’s restrictive trade policies.
10 MONTHS SURPLUS
Meanwhile, the country’s BoP position recorded a surplus of $4.393 billion in the ten-month period, up from the surplus of $3.246 billion a year ago.
“The surplus partly reflected continued net inflows from personal remittances, trade in services and NG net foreign borrowing,” the central bank said.
“In addition, net foreign direct investment and portfolio investment contributed to the BoP surplus,” it added.
The latest data from the BSP shows that net foreign direct investment (FDI) inflows rose 3.9% year-on-year to $6.07 billion in the first eight months.
Meanwhile, foreign portfolio investments generated net inflows of $3.02 billion in the January-September period, significantly higher than last year’s inflows of $387.24 million.
“Over the coming months, the BoP data could improve and therefore lead to a better GIR, partly due to the proceeds from the national government’s foreign currency borrowings from both commercial sources which would also be added to the BoP and GIR of the country. said Mr. Ricafort.
He also noted the continued growth in Filipino workers’ remittances abroad and business process outsourcing income, exports and income from foreign tourism.
“Going forward, any improvement in the BoP data and in the GIR data for the coming months could still help provide a greater cushion for the peso exchange rate (against) the US dollar, especially against any speculative attacks, and can also help strengthen the country’s external position. ”, he added.
The BSP expects a BoP surplus of $2.3 billion by the end of the year, equivalent to 0.5% of economic output.