BOP posts $1.6-B deficit in May

The country’s balance of payments (BPO) position in May rose to $1.606 billion, the highest monthly deficit so far this year, and is also higher than the same month last year of $1.397 billion, data from the Bangko Sentral ng Pilipinas showed.

The May deficit has brought the country’s overall BOP as of end May this year to $1.527 billion, reversing the surpluses in March and April, because of the trade-in-goods deficit. The May BOP was also higher than the $415 million in April, resulting in a five-month overall BOP deficit.

The end May $1.527 billion deficit is lower compared with same period last year of $1.627 billion.

The BSP said the May BOP deficit “reflected outflows mainly from the National Government’s (NG) foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures.”

As for the cumulative BOP deficit, the BSP said this was due to the trade-in-goods deficit, which was partly offset by inflows such as from personal remittances, net foreign borrowings by the NG, foreign direct and portfolio investments.

With the preliminary BOP numbers, the BSP also reported the final gross international reserves (GIR) level of $103.65 billion as of end-May, lower than April’s $105.4 billion.

The BSP said the latest updated GIR level still represents “more than adequate external liquidity buffer” and is equivalent to 8.7 months’ worth of imports of goods and payments of services and primary income.

Last Friday, the BSP revised higher its 2022 BOP deficit projection to $6.3 billion from its previous estimate of $4.3 billion amid key external challenges such as high inflation and rising prices of oil and non-oil commodities.

The BSP also lowered its projected GIR for this year to $105 billion from its previous forecast of $108 billion.

BSP offiials said the latest round of external sector forecast revisions were “underpinned largely by the projected widening of the current account deficit” which is a “development (that) is reflective of the foreseen sustained acceleration of goods imports.”

The BSP said the emerging BOP outlook for 2022 and 2023 “remains quite circumspect in view of the recent buildup in external risks.” They highlighted the downgraded global growth outlook following the escalation of the Ukraine-Russia conflict and its international ramifications, most notably the increase in food and fuel prices.

The BSP also cited the expected slowing of China’s economy which could also put pressure on trade prospects, adding that “capital flows could be particularly volatile following the abrupt monetary policy normalization in the US and in other major economies.”

The latest overall BOP position estimates were approved during the Monetary Board’s June 16 meeting.

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