January-September 2019 BOP Position Reverses to a Surplus

The BOP position for the first nine months of 2019 posted a surplus of US$5.6 billion, a turnaround from the US$5.1 billion deficit registered in the same period last year. This developed as a result mainly of the increased net inflows (i.e., net borrowing by residents from the rest of the world) in the financial account and the decreased deficit in the current account.

January-September 2019 Developments

Current Account.The current account in the first three quarters of 2019 posted a deficit of US$992 million (0.4 percent of GDP), 83 percent lower than the US$5.8 billion deficit in the same period last year. This development emanated largely from the lower trade in goods deficit combined with higher net receipts in the trade in services, and in the primary and secondary income accounts.

Capital Account. The capital account recorded increased net receipts of US$49 million in the first nine months of 2019 from US$44 million in the same period a year ago. This developed on account of the lower gross acquisition of non-produced nonfinancial assets of US$2 million from US$10 million last year.

Financial Account. The financial account registered net inflows of US$4.5 billion during the period January to September 2019, or up by 3 percent from the net inflows recorded in the same period in the previous year. This was mainly on account of the reversal in portfolio investment to net inflows from net outflows, which was partly tempered by lower net inflows in the direct and other investment accounts.

Third Quarter 2019 Developments

The country's balance of payments position (BOP) recorded a surplus of US$778 million in Q3 2019, a turnaround from the US$1.9 billion deficit posted in the same quarter last year. This positive outcome was a result primarily of the reversal of the current account to a surplus from a deficit in the same quarter last year, due to the combined impact of narrower trade in goods deficit and higher net receipts in the trade in services, and primary and secondary income accounts during the quarter. Meanwhile, the financial account registered lower net inflows (i.e., net borrowing by residents from the rest of the world) following the reversal of portfolio investments to net outflows, along with the decline in net inflows of direct investments. This developed even as the other investment account posted increased net inflows during the quarter. Investor sentiment remained subdued due to uncertainties in global economic conditions as trade tensions and geopolitical risks continued to persist among major economies.

Current Account. The current account recorded a surplus of US$654 million in Q3 2019, a reversal of the US$2.1 billion deficit posted in Q3 2018. This developed mainly from the lower deficit in the trade in goods account. Higher net receipts of trade in services and primary and secondary income also contributed to the rebound of the current account in the third quarter of the year.

Capital Account The capital account's net receipts rose by 11.6 percent to US$17 million in Q3 2019 from US$15 million registered during the same quarter a year ago. This was attributed to the lower gross acquisition of non-produced non-financial assets (from US$4 million to US$1 million).

Financial Account. The financial account continued to post net inflows (or net borrowing by residents from the rest of the world) of US$848 million in Q3 2019, albeit lower than the US$1.8 billion net inflows in Q3 2018. The decline in net inflows during the period was due primarily to the significant drop in net inflows in the direct investment account and the reversal to net outflows in the portfolio investment account, which tempered the expansion in net inflows in the other investments account.

Gross International Reserves

The country's gross international reserves (GIR) amounted to US$85.6 billion as of end-September 2019, higher than the US$74.9 billion level registered in end-September 2018. At this level, reserves sufficiently covered 7.5 months' worth of imports of goods and services and payments of primary income. It was also equivalent to 5.4 times the country's short-term external debt based on original maturity and 4.1 times based on residual maturity. The year-on-year increase in reserves reflected the inflows from the BSP's foreign exchange operations, the NG's net foreign currency deposits, as well as income from the BSP's investments abroad, and revaluation adjustments on its foreign currency-denominated reserves. This was partially offset by the NG's payments for servicing its foreign exchange obligations.

Exchange Rate

For the third quarter and the first nine months of the year, the peso appreciated against the baskets of currencies of major trading partners (MTPs) and trading partners in advanced (TPI-A) and developing (TPI-D) countries in nominal and real terms as seen in the tables below. As such, the peso's external competitiveness weakened against these trade baskets of currencies for the said periods.

Source: Bangko Sentral ng Pilipinas (BSP)