The Philippines’ BOP has been in deficit territory for the 8th month as of August 2022.
Data from the Bangko Sentral ng Pilipinas (BSP) shows that the Philippine economy continued to bleed millions of dollars in August.
BSP said the country’s balance of payments (BOP) in August this year was $572 million in deficit. The country's BOP has been in deficit territory for the eighth month in a row.
BOP is a summary of a country’s transactions with the rest of the world. It examines the transaction of all exports and imports of goods and services for a giver period, usually a year or months. It is considered as an economic indicator as it shows the level of earnings or expenses of the Philippines.
A deficit occurs when a country's dollar expenditures exceed its dollar earnings within a certain period.
The August deficit was a reversal of the $1.044-billion surplus seen a year ago, however, it is a lower deficit compared to the $1.82 billion in July, Business Mirror reported.
“The BOP deficit in August 2022 reflected outflows arising mainly from the National Government’s foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” BSP explained.
The August BOP deficit raised the cumulative BOP level from January to August 2022 to $5.5 billion, higher than the $253 million deficit recorded a year ago.
BSP said this cumulative BOP deficit reflected the growing trade in goods deficit.
Earlier this year, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said that the country’s BOP could still be affected by the Russian invasion in Ukraine for the coming months. Because of this, it is expected the prices for importation will rise and lead to a higher trade deficit and affect the peso.
Months did pass by, and the price hike of food and fuel continues to hurt consumers and the economic growth of the country.
A BOP deficit can be corrected by encouraging exports as the country has more imports than exports. It can be encouraged by producing quality products, good productivity, better marketing, and a policy of import substitution.
Meanwhile, Regional think tank AMRO (ASEAN +3 Macroeconomic Research Office) said that the country’s external account may suffer some pressure in 2022 as the external situation has deteriorated.
In tandem with the country’s BOP deficit, the gross international reserves (GIR) fell to $97.4 billion as of the end of August 2022 from $99.8 billion at the end of July 2022.
“Nonetheless, the latest GIR level represents a more than adequate external liquidity buffer equivalent to 7.8 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 7 times the country’s short-term external debt based on original maturity and 4.4 times based on residual maturity,” BSP said.
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