The country’s overall balance of payments (BOP) position posted a surplus of US$80 million in June 2020, a reversal from the US$404 million BOP deficit recorded in the same month last year. The BOP surplus in June 2020 reflected mainly the inflows from the National Government’s (NG) foreign loan proceeds that were deposited with the BSP as well as the BSP’s income from its investments abroad. These inflows were offset, however, by the foreign currency withdrawals made by the NG to pay its foreign currency debt obligations during the month in review.
For the third consecutive month, the cumulative BOP position recorded a surplus, registering US$4.11 billion in June. Notwithstanding, the six-month cumulative BOP surplus this year was lower than the US$4.79 billion surplus recorded a year ago. The current BOP surplus was supported mainly by foreign borrowings by the NG, the bulk of which were drawn in the second quarter, along with lower merchandise trade deficit.1 These positive outcomes negated fully the impact of higher net outflows of foreign portfolio investments, and lower net inflows from trade in services, personal remittances, and foreign direct investments.2
The BOP position reflects a record high final gross international reserves (GIR) level of US$93.47 billion as of end-June 2020. At this level, the GIR represents an ample external liquidity buffer, which can cushion the domestic economy against external shocks.3 This is equivalent to 8.5 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 7.3 times the country’s short-term external debt based on original maturity and 4.8 times based on residual maturity.4
1 Based on the Philippine Foreign Trade Statistics published by the Philippine Statistics Authority (PSA) for January-May 2020.
2 Based on data on net BSP-registered portfolio investments reported by custodian banks for January-May 2020, trade in services for January-March 2020, personal remittances from overseas Filipinos for January-April 2020, and foreign direct investments for January-April 2020.
3 Specifically, it ensures availability of foreign exchange to meet balance of payments financing needs, such as for payment of imports and debt service, in extreme conditions when there are no export earnings or foreign loans.
4 Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.