Angelo Taningco
Economist, Treasury Group

The Philippines’ balance of payments (BOP) slipped to a deficit of $59 million in May following its $917 million surplus in April, according to the latest monthly BOP data of the Bangko Sentral ng Pilipinas (BSP) released on 19 June. This was the fourth month in the year that the BOP recorded a deficit position, with its monthly deficit level the second-smallest since the start of the year. On a cumulative basis, the BOP deficit stood at $136 million in January-May, a reversal from its $216 million surplus in the first five months of the previous year.

We conjecture that the BOP deficit for the month of May could have likely been precipitated by net outflows on the financial account and trade-in-goods deficit that combined were partly offset by net receipts in trade-in-services, primary income, and secondary income.

Despite the monthly reversal in the BOP from a surplus to a deficit in May, the BSP’s gross international reserves (GIR) climbed $51 million in the same month. We estimate the correlation coefficient between the BOP and the month-on-month (mom) change in the GIR to be at 0.76, indicating a strong and positive correlation between the two variables.

Figure: BOP & ∆GIR
Jan. 2014 – May 2017
($ million)

 
We maintain our full-year BOP forecast of a $0.5 billion surplus, which we estimate would be 0.2% of gross domestic product (GDP). We think the BOP for the rest of the year will be influenced by a narrowing trade-in-goods deficit; continual growth in net receipts of trade-in-services, primary income, and secondary income; and moderating net outflows on the financial account.

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