Dollar-bleeding PHL’s August BOP gap hits $572 million

THE Philippine economy continued to bleed millions of dollars in August, data from the Bangko Sentral ng Pilipinas (BSP) showed.

The Central Bank reported on Monday that the country’s Balance of Payments (BOP) yielded a deficit of $572 million in August this year. This is the eighth
consecutive month that the country’s BOP registered in the deficit territory.

The August deficit was a reversal of the $1.044-billion surplus seen in the same month last year. It is, however, a lower deficit compared to the $1.82 billion in the previous month.

A country’s BOP is the summary of its transactions with the rest of the world.

It is usually considered an important economic indicator in an economy as it shows the level of earnings or expenses of the Philippines in its transactions with the world. A deficit means that the country had more dollar expenditures than its dollar earnings during a given period.

“The BOP deficit in August 2022 reflected outflows arising mainly from the National Government’s foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP explained.

The BOP deficit in August brought the cumulative BOP level for January to August 2022 to a $5.5-billion deficit, higher than the $253-million deficit recorded in the same period a year ago. According to the Central Bank, this cumulative BOP deficit reflected the widening trade in goods deficit.

Earlier this year, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said that in the coming months, the country’s BOP could still be affected by the continued Russian invasion in Ukraine, as it is expected to elevate the prices of importation and lead to higher trade deficits and affect the peso.

Regional think tank AMRO (ASEAN +3 Macroeconomic Research Office) also earlier said the country’s external account could face some pressure in 2022 as the external environment has become more unfavorable.

In line with the deficit in the country’s BOP, the gross international reserves (GIR) of the country declined to $97.4 billion as of end-August 2022 from $99.8 billion as of end-July 2022.

“Nonetheless, the latest GIR level represents a more than adequate external liquidity buffer equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 7 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity,” the BSP said.

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