Angelo Taningco
Economist, Treasury Group

Philippine balance of payments (BOP) recorded a deficit for the second-consecutive month in June, amounting to $569 million which is greater than its May deficit of $59 million, according to the latest BOP data of the Bangko Sentral ng Pilipinas (BSP) released on 19 July.

The June BOP deficit is the biggest in the first six months of the year, and we think that its level may have been driven largely by the current account recording a relatively large deficit for the month. We believe the month’s trade-in-goods deficit may have been induced by a more robust import demand growth versus export growth and has outweighed the combined net receipts in the trade-in-services, primary income, and secondary income accounts.

The larger BOP deficit in June compared to May was already expected since latest foreign reserves data that came out earlier shows a $764 million drop in the gross international reserves (GIR) during June. Correlation between the BOP and monthly change in the GIR remains positive and high (Figure 1).

Figure 1: BOP and ∆GIR
($ million)

 
The second quarter (Q2) 2017 BOP came out in a surplus of $289 million-a reversal from its first quarter (Q1) 2017 deficit of $994 million-mainly due to the BOP’s surplus in April that more than offset the BOP deficits in May and in June (Figure 2).

Figure 2: Quarterly BOP
($ million)

 
We surmise the second-quarter BOP surplus may have likely been generated by a net inflow in the financial account that eclipsed the deficit in the current account. In the first half (H1) of the year, the BOP deficit stood at $705 million; this was down on a year-on-year (yoy) basis given that H1 2016 had a BOP surplus of $634 million.

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