BOP swung to $724-M deficit in Oct, highest in 9 months
Foreign currency withdrawals made by the government to pay for its offshore debts and spending needs flipped the Philippines’ dollar position back to a deficit in October, with the gap being the largest in nine months, the Bangko Sentral ng Pilipinas (BSP) reported.
This, while BSP Governor Eli Remolona Jr. said the central bank is on wait-and-see mode for the impact of a second Trump presidency on the Philippines’ external position.
Data from the BSP showed that the country’s balance of payments (BOP) position had swung to a deficit of $724 million in October, from the $3.5 billion surplus recorded in the preceding month.
This was the largest BOP deficit recorded since the $740-billion gap in January 2024. This, in turn, trimmed the 10-month BOP surplus to $4.4 billion, albeit still above the central bank’s projection of a $2.3-billion dollar windfall for this year.
BOP summarizes the economic transactions of a country with the rest of the world.
A surplus arises when more foreign funds entered the economy against those that left during a period, giving the country more dollar resources that it can use to transact with the rest of the world. A deficit means the reverse happened
Explaining the return to a BOP deficit last month, the BSP said the outflows mainly came from “net foreign currency withdrawals” of the government, meaning the state had taken out more cash than it deposited with the central bank during the period to settle its external debts and fund “various expenditures”.
Speaking to reporters, BSP Governor Eli Remolona Jr. said the central bank is watching out for the impact of another Trump presidency on the country’s dollar position, adding that some key components of the BOP like remittances and services export are “less easily subject to tariffs”.
“So maybe we’re a little bit insulated from the tariffs,” Remolona said.
”We don’t know exactly what the tariffs will be because of the size of the tariffs that are being contemplated. We don’t really know what the effects will be. So we have to wait and see, and then we’ll figure it out,” he added.
The latest dollar position, in turn, slashed the Philippines’ gross international reserves (GIR) to $111.1 billion as of October, from the all-time level of $112.7 billion in September.
GIR serves as the country’s buffer against external shocks. It is viewed to be adequate if it can finance at least three months’ worth of the country’s imports of goods and payments of services and primary income.
The reserves are also considered ample if they provide at least 100 percent cover for the payment of the country’s foreign liabilities—both from the public and private sectors—falling due within the immediate 12-month period.
The BSP said the latest GIR level can cover eight months’ worth of imports of goods and payments of services and primary income. The amount is also about 4.4 times the country’s short-term external debt based on residual maturity.
