The Philippines’ gross international reserves (GIR) rose to USD104.8 billion in August, even as the country posted another balance of payments (BOP) deficit amid a persistent trade gap and portfolio outflows.
The Bangko Sentral ng Pilipinas said GIR increased by USD1.5 billion from USD103.3 billion at end-July, mainly due to higher gold valuations and increased net income from the central bank’s foreign investments as global bond yields rose.
The end-August reserve level was equivalent to 6.6 months of imports of goods and payments of services and primary income. It also covered about 3.3 times the country’s short-term external debt based on residual maturity.
The stronger reserve position provides the Philippines with substantial foreign exchange liquidity to meet external obligations and absorb potential shocks.
The country, however, recorded a USD596-million BOP deficit in August, bringing the January-August shortfall to USD5.9 billion, wider than the USD5.4-billion deficit in the same period last year.
The year-to-date deficit continued to reflect the country’s trade-in-goods gap and net outflows from foreign portfolio investments, according to the BSP.
These were partly offset by sustained inflows from overseas Filipino remittances, government foreign borrowings, trade in services, and foreign direct investment.
The figures present a mixed picture of the external accounts. Reserve accumulation has strengthened the country’s liquidity position, but the widening year-to-date BOP deficit shows that trade and financial outflows continue to weigh on external balances.
For policymakers, the key issue is whether these offsetting flows remain strong enough to support external stability as trade and investment conditions evolve.
