BOP Surplus Rises Significantly to US$4.2 Billion in Q2 2020; First Half 2020 Cumulative Surplus Now at US$4.1 Billion

The country’s balance of payments (BOP) position recorded a higher surplus of US$4.2 billion in Q2 2020 from the US$991 million posted in the same quarter last year. The BOP position rose significantly due to the reversal in the current account to a surplus, following a substantial reduction in the trade in goods deficit. The sluggish performance of both imports and exports of goods reflected the adverse impact of the COVID-19 pandemic, including the disruptions in the global demand and supply chains.

 

Meanwhile, the financial account reversed to net outflows mainly on account of the turnaround of portfolio investments to net outflows. This, however, was tempered by the decline in net outflows of other investments and the increase in net inflows of direct investments.

 

Current Account. The current account registered a surplus of US$4.4 billion in Q2 2020, a reversal from the US$931 million deficit posted in Q2 2019. This outcome stemmed mainly from the lower trade in goods deficit of US$5.4  billion in Q2 2020 (from US$12.1 billion same quarter last year), which more than offset the decline in net receipts of trade in services to US$2.7 billion (from US$3.3 billion) , primary income to US$1 billion (from US$1.2 billion) and secondary income to US$6.1 billion (from US$6.7 billion).

 

Capital Account.  Net receipts in the capital account decreased to US$8 million in Q2 2020 from US$22 million in Q2 2019. This was on account of the combined effect of net payments on gross acquisition of nonproduced nonfinancial assets of US$8 million (from US$1 million net receipts on gross disposal of nonproduced nonfinancial assets) and lower receipts of other capital transfers to the National Government (NG) amounting to US$16 million from US$20 million.

 

Financial Account.  The financial account registered net outflows of US$152 million in the second quarter of 2020, a turnaround from the US$278 million net inflows in the same quarter last year.  This developed mainly on account of the reversal of portfolio investments to net outflows of US$731 million from net inflows of US$1.9 billion. This reversal was tempered by the decline in net outflows of other investments to US$548 million (from US$2.4 billion) and the increase in net inflows of direct investments to US$1.1 billion (from US$727 million).

The favorable outturn in Q2 BOP position brought the cumulative surplus for the first half of 2020 to US$4.1 billion although lower than the US$4.8 billion surplus registered in the same period last year. This decline in the surplus was due to the reversal of the financial account to net outflows. Portfolio investments reversed to net outflows on concerns of a global economic slowdown amid the ongoing COVID-19  health pandemic. Other investments registered higher net outflows due largely to residents’ net repayment of their liabilities. However, these outflows were mitigated by higher net inflows in direct investments.

Meanwhile, the current account posted a surplus, a turnaround from the previous year’s deficit, attributed mainly to the narrowing of the deficit in the trade in goods account.  This may be attributed to disruptions in the global demand and supply chains as countries imposed restrictions to contain this health crisis, which negatively impacted the country’s exports and imports of goods.

Current Account. The current account registered a surplus of US$4.4 billion in the first six months of 2020, a reversal from the US$2.6 billion deficit in the same period a year ago. This development was on account of the decline in trade in goods deficit to US15.7 billion (from US$24.4 billion), which more than offset the lower net receipts recorded in trade in services of US$5.2 billion (from US$5.9 billion),  primary income of US$2.1 billion (from US$2.5 billion) and secondary income of US$12.8 billion (from US$13.3 billion).

 

Capital Account. The capital account registered lower net receipts of US$16 million in the first six months of 2020 from US$47 million in the same period last year. This resulted from the net payment on acquisition of non-produced nonfinancial assets of US$16 million and lower receipts of other capital transfers to the NG amounting to US$31 million.

 

Financial Account.  The financial account recorded net outflows of US$3.9 billion in the first six months of 2020, a turnaround from net inflows of US$5.5 billion in the same period last year.  The shift to net outflows was supported by the reversal in portfolio investment account to net outflows of US$1.5 billion from net inflows of US$4.9 billion and the increase in net outflows  of other investments (by 280.4 percent) compared to the level a year-ago. These outflows were partly reduced by the increase in net inflows in the direct investment account by 22.3 percent from the comparable level in 2019.

 

Gross International Reserves

 

The country’s gross international reserves (GIR) amounted to US$93.5 billion as of end-June 2020, significantly higher than the US$84.9 billion level recorded a year ago. At this level, the reserves adequately covered 9.3 months’ worth of imports of goods and payments of services and primary income. It was also equivalent to 8.7 times the country’s short-term external debt based on original maturity and 5.3 times based on residual maturity. This year-on-year increase in reserves reflected inflows arising largely from the NG’s foreign currency borrowings that were deposited with the BSP as well as the BSP’s foreign exchange operations, income from its investments abroad, and revaluation adjustments on its foreign currency-denominated reserves.

 

Exchange Rate

 

For the second quarter and the first half 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, indicating a slight loss in external competitiveness against these trade baskets of currencies for the said periods.

Revised 2018 and 2019 BOP data

 

The 2018 and 2019 BOP data have been revised to reflect updates from various data sources and post-audit adjustments. The revised 2018 and 2019 BOP data with accompanying technical notes are posted on the BSP website.

 

 

Source: Bangko Sentral ng Pilipinas (BSP)