Q1 2020 BOP Position Reverses to a Deficit of US$68 Million

Q1 2020, a turnaround from the US$3.8 billion surplus posted in the same quarter last year. Based on preliminary data, the reversal of the BOP position to a deficit stemmed mainly from the turnaround of the financial account to net outflows as both the other investment and portfolio investment accounts reversed to net outflows during the quarter due mainly to weak global and domestic economic outlook following the corona virus (Covid-19) pandemic.1  Despite the uncertainties surrounding the economic impact of the virus outbreak, these outflows were mitigated by net inflows in the direct investment account in the first quarter of 2020.


Meanwhile, the current account posted a surplus in Q1 2020, a reversal from the deficit registered in Q1 2019, attributed mainly to the narrowing of the trade in goods deficit, along with increased net receipts of secondary income. The country’s exports and imports of goods performance reflected the weakening in global demand, disruptions in global supply chains, and a slowdown in domestic economic activity, owing to the enhanced community quarantine implemented by the government to control the spread of the virus.

January-March 2020 Developments


Current Account. The current account recorded a surplus of US$92 million in Q1 2020, a reversal from the US$1.7 billion deficit posted in Q1 2019. This developed mainly from the lower deficit in the trade in goods account and higher net receipts in the secondary income account, which were mitigated partly by the decline in net receipts of trade in services and primary income.


Capital Account.  Net receipts in the capital account more than doubled the US$21 million recorded in Q1 2019 to reach US$43 million in Q1 2020. This was on account primarily of the higher receipts of other capital transfers to the National Government (NG) amounting to US$51 million.


Financial Account.  The financial account posted net outflows of US$3.8 billion in the first quarter of 2020, a reversal of the US$4.6 billion net inflows recorded in the same quarter last year. This developed as portfolio and other investment accounts reversed to net outflows, representing mostly a pull out of volatile capital flows due to uncertainty caused by the pandemic.


Gross International Reserves


The country’s gross international reserves (GIR) amounted to US$88.9 billion as of end-March 2020, higher than the US$83.6 billion level registered in end-March 2019. At this level, reserves sufficiently covered 8 months’ worth of imports of goods and services and payments of primary income. It was also equivalent to 6.7 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity. The increase in reserves year-on-year reflected inflows arising from the BSP’s foreign exchange operations, income from its investments abroad, and revaluation adjustments on its foreign currency-denominated reserves as well as the NG’s foreign currency deposits with the BSP. These inflows were partly offset, however, by foreign currency withdrawals made by the NG to pay for its foreign currency debt obligations.


Exchange Rate


For the first quarter 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 table below. As such, the peso’s external competitiveness weakened against these trade baskets of currencies for the said period.

1 The overall BOP position was computed based on final data on the country’s Gross International Reserves (GIR).  However, the balances of the current, capital, and financial accounts and their components are preliminary as these were based on partial and preliminary data and estimates, considering the operational constraints of our data sources amid the community quarantine.


Source: Bangko Sentral ng Pilipinas (BSP)