July BOP posts $1.8 billion deficit

The country’s overall balance of payments posted a deficit of $1.8 billion in July 2022, a reversal from the $642 million BOP surplus recorded in the same month last year, data from the central bank showed on Friday.

But economists quickly downplayed any long-term trend and said the country’s BOP position would narrow as global prices stabilize and the debt payments shift to domestic lenders.

“The BOP deficit in July 2022 reflected outflows arising mainly from the national government’s foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the Bangko Sentral ng Pilipinas said.

The BOP deficit in July brought the cumulative BOP level for January-July 2022 to a $4.9 billion deficit, higher than the $1.3-billion deficit recorded in the same period a year ago.

Based on preliminary data, it added that this cumulative BOP deficit reflected the widening trade in goods deficit.

Meanwhile, the gross international reserves level declined to $99.8 billion as of end-July 2022 from $100.9 billion as of end-June 2022, BOP data shows.

Nonetheless, the latest GIR level represents a more than adequate external liquidity buffer equivalent to 8.3 months’ worth of imports of goods and payments of services and primary income.

Moreover, it is also about 7.2 times the country’s short-term external debt based on original maturity and 4.6 times on residual maturity.

Chief economist Domini Velasquez of China Bank Corp. told Daily Tribune that “higher trade in goods deficit largely contributed to the increasing BOP deficit. However, as global commodity prices subside [e.g., oil and non-oil], we expect this deficit to narrow slightly.”

“Downside risks to BOP is that lower import prices will be challenged by anemic export growth as global growth slows. Additionally, as the national government pays off its foreign currency debt and shifts to domestic sources, additional withdrawals are likely,” she added.

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