The country’s overall balance of payments (BOP) position continued to post surplus at US$8 million in July 2020, bringing year-to-date surplus position to US$4.12 billion. The BOP surplus in July 2020 reflected mainly the inflows from the National Government’s (NG) foreign loan proceeds that were deposited with the BSP as well as the BSP’s income from its investments abroad. These inflows were offset, however, by the foreign currency withdrawals made by the NG to pay its foreign currency debt obligations during the month in review.
Notwithstanding, the continued expansion in the country’s overall external position, cumulative BOP surplus was lower than the US$5.04 billion surplus recorded for the same period a year ago. The current overall BOP surplus was supported mainly by foreign borrowings of the NG, the bulk of which were drawn in April up to July, and the lower merchandise trade deficit.1 These positive outcomes negated fully the impact of higher net outflows of foreign portfolio investments, and lower net inflows from foreign direct investments, trade in services, and personal remittances.2
The BOP position reflects a record high final gross international reserves (GIR) level of US$98.6 billion as of end-July 2020. At this level, the GIR represents an ample external liquidity buffer, which can cushion the domestic economy against external shocks.3 This is equivalent to 8.9 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 7.6 times the country’s short-term external debt based on original maturity and 4.9 times based on residual maturity.4
1 Based on the Philippine Foreign Trade Statistics published by the Philippine Statistics Authority (PSA) for January-June 2020.
2 Based on data on net BSP-registered portfolio investments reported by custodian banks for January-July 2020, personal remittances from overseas Filipinos for January-June 2020, foreign direct investments for January-May 2020, and trade in services for January-March 2020.
3 Specifically, it ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans.
4 Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.
Source: Bangko Sentral ng Pilipinas (BSP)