The country’s balance of payments (BOP), which tells whether the Philippines earns more foreign currency than it spends, surprised the monetary authorities who expected a deficit when the balance in the first three months proved a surplus instead.
The Bangko Sentral ng Pilipinas initially released data indicating the BOP as a deficit $1.6 billion wide equal to 0.4 percent of local output measured as the gross domestic product (GDP).
But when the numbers were in, while preliminary, the BSP reported a BOP surplus of $3.5 billion equal to 3.4 percent of GDP on the back of a surfeit in services exports, business process outsourcing revenue, travel receipts and remittance growth.
“The country’s balance of payments (BOP) position registered a surplus of $3.5 billion in Q1 2023, higher than the $495 million surplus recorded in Q1 2022. The BOP surplus increased due to higher net inflows (or net borrowing by residents from the rest of the world) in the financial account amounting to $5.7 billion in Q1 2023 from the $4.7 billion net inflows in Q1 2022.
In the financial account of the BOP, foreign direct investment which are long-horizon investments that generate tax for the government and employment for Filipinos posted net inflows totaling $718 million, portfolio or “hot” money inflows of another $694 million and other investment inflows worth $4.3 billion that more than made up for the net outflow of financial derivatives for the period.
The capital account of the BOP, which shows all transactions made by the Philippines with the rest of the world, also showed a surplus of $212 million from the year-ago deficit of $19 million.
“The capital account recorded net receipts amounting to $21 million in Q1 2023, a reversal from the $19 million net payments recorded in the same quarter in the previous year. This was due mainly to the decline in gross acquisitions of non-produced non-financial assets (e.g., patents, trademarks, and copyrights) to $2 million in the first quarter of 2023 from the $42 million comparable figure recorded in Q1 2022,” the BSP reported.
The current account component which showed a wider deficit in the first quarter this year of $4.3 billion from the year-ago deficit of $4 billion, due mainly to the widening trade in goods deficit and lower net receipts in the primary income account. This, the BSP said, was partly muted by the increase in net receipts in the trade in services account.
The BSO earlier anticipated a narrower merchandise trade gap this year on the basis of goods imports growth seen slow down sharply following the pullback in international prices of major commodities, particularly fuel. It also minded a sustained fall in goods exports as global demand weakens further.
“Despite the optimism attached to the reopening of China’s economy, such view remains tentative given its numerous domestic challenges, among which is declining property sales and real estate investment. Nonetheless, prospects for business process outsourcing (BPO) and tourism industries remain positive, alongside stable remittance inflows from overseas Filipinos (OFs), providing support to the current account.
“Meanwhile, inflows from foreign direct investments (FDIs) are projected to be lower than in the previous projection round in line with the slowdown in non-residents investments globally. This is attributed to the observed geoeconomic fragmentation of FDIs and slowdown in the globalization process triggered primarily by rising geopolitical tensions between major economies. Emerging market economies are more susceptible to FDI relocation as most rely heavily on capital investment from distant countries. Furthermore, emerging financial market vulnerabilities combined with the after-effects of monetary policy adjustments in advanced economies,” the BSP said.
