By Luisa Maria Jacinta C. Jocson, A reporter
PHILIPPINES’ outstanding balance of payments (BoP) narrowed significantly in 2024, falling short of the central bank’s full-year estimate.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that the annual BoP position stood at more than $609 million last year, down 83.4% from a surplus of $3.672 billion at the end of 2023.
This was also significantly lower than the BSP’s full-year plan of 3.5 billion rand.
BoP shows a snapshot of national and global transactions. A surplus shows that more money has come into the country, while a deficit means that more money has fled.
“Based on preliminary data, the decrease in net BoP accumulation was due to higher trade deficit and lower receipts from trade in services and net foreign borrowing by the National Government (NG),” the BSP said.
Data from the country’s statistics agency showed the trade deficit widened by 3.2% year-on-year to $49.96 billion in the January-November period.
Outstanding foreign debt rose to a record $139.64 billion as of the end of September, data from the BSP showed.
“This decline was partially muted, however, due to continued inflows from remittances and net foreign portfolio and direct investment,” the central bank added.
In December alone, the BoP reached a deficit of $1.508 billion, a change from a surplus of $642 million a year ago.
“The BoP deficit in December 2024 reflected the BSP’s foreign currency operations and the decline in NG and BSP deposits to service its foreign currency liabilities.”
Last year, the government raised $2 billion in international bonds in May and another $2.5 billion in its bond issue in August.
At the end of December, the BoP shows a gross international reserve (GIR) level of $106.3 billion, down 2% from $108.5 billion as of the end of November.
“Specifically, the latest GIR rate guarantees the availability of foreign currency to meet the balance of payments needs, such as the payment of purchases and debt service, in extreme cases where there is no export earnings or foreign loans,” the central bank said.
The dollar reserve level is sufficient to cover 7.5 months of imports and the payment of services and primary income. We also equate the country’s short-term external debt with approximately 3.7 times based on net maturity.
Chief Economist Rizal Commercial Banking Corp. Michael L. Ricafort said the wide BoP deficit in December was partly due to the trade deficit in recent months.
“There is a steady increase in imports, especially in energy, food and capital goods that may outpace foreign employment,” said John Paolo R. Rivera, senior researcher at the Philippine Institute for Development Studies.
“The continued decline in exports due to weak global demand especially from major trading partners like China has worsened the trade deficit, which is a large part of the current account,” he added.
Mr. Ricafort said the peso’s volatility, especially from November to December, may affect the BoP’s position.
“The strong US dollar has also increased the cost of servicing US dollar bonds,” added Mr. Rivera.
At the end of 2024, the peso closed at P57.845, down P2.475 or 4.28% from the end of 2023 of P55.37 against the dollar.
The peso fell to a record low of P59 three times last year – twice in November and once in December.
Mr. Rivera said that the return of tourism receipts and the business process of income release may not be enough to “completely eliminate the drag of trade imbalance.”
“Furthermore, the efforts of the government and the private sector to resolve the growing external debt are likely to have an impact on the outflow of money from the financial account, worsening the BoP situation,” he added.
In the coming months, the BoP could improve if construction inflows continue to increase, said Mr. Ricafort.
“Any improvement in the BoP data and the GIR data for the coming months may still help to provide a greater cushion for the exchange rate of the peso against the US dollar especially against any perceived attack, as well as helping to strengthen the country’s external position,” he said.
The latest changes will also help attract more investors to the country, said Mr. Ricafort.
In November, President Ferdinand R. Marcos, Jr. signed into law the Business Acquisition and Business Tax Incentives to Boost Economic Revitalization Opportunities.
The law increases financial benefits and decreases corporate income tax on certain foreign businesses.
The BSP generates a BoP surplus of $2.1 billion by 2025, equivalent to 0.4% of gross domestic product.
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