PH BOP swung back to deficit in July

The Philippines’ balance of payments (BOP) returned to a deficit in July after two consecutive months of surpluses as renewed geopolitical tensions and the timing of large transactions weighed on the country’s external position.

According to the Bangko Sentral ng Pilipinas, the country’s BOP posted a $1.47-billion deficit in July, reversing the $3.4-billion surplus in June.

The latest figure also widened sharply from $167 million in the same month last year.

The July number brought the deficit in the first seven months of the year to $5.35 billion, 7 percent narrower than the $5.77-billion deficit recorded in the same period last year.

The cumulative deficit is equivalent to roughly half of the central bank’s $10.7-billion deficit projection for the full year.

Consequently, the country’s gross international reserves (GIR), or foreign assets that serve as a buffer against external shocks, fell to $103.3 billion during the month, the lowest since January 2025, when reserves stood at $103.27 billion.

Still, this reserve level remained sufficient to cover 6.7 months’ worth of imports of goods and payments of services and primary income.

It was also equivalent to nearly four times the country’s short-term external debt based on residual maturity.

Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said the country’s external buffers remained solid despite the return to a BOP deficit.

“The July BOP deficit and lower GIR mainly reflect the country’s persistent trade gap, portfolio outflows and external debt-related payments following the temporary boost from foreign borrowings in June,” Asuncion said.

Notably, the national government in June raised $2.5 billion through a triple-tranche US dollar bond issuance. Meanwhile, the country’s trade deficit widened by nearly 26 percent to $30.8 billion in the first half, as imports continued to outpace exports.

Asuncion also noted that the latest deficit could continue to exert pressure on the peso, which on Wednesday touched a new intraday low of 61.995 against the US dollar, nearing the 62-per-dollar level.

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For Michael Ricafort, chief economist at Rizal Commercial Banking Corp., renewed tensions between the United States and Iran could further fuel volatility in global financial markets.

“For the coming months, the markets could anticipate developments related to any possible extension of the 60-day US-Iran interim deal or lack thereof,” Ricafort said.

He added that continued tensions could push up global crude oil prices anew, increasing the country’s oil import bill and potentially widening the trade deficit while adding to inflationary pressures.

But for Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., the return to a deficit should not be viewed in isolation, as monthly BOP figures can be affected by the timing of large transactions.

“The Philippines continues to benefit from strong structural dollar inflows, but maintaining a healthy balance between foreign exchange earnings and import requirements will be crucial to keeping the external position stable amid ongoing global economic and geopolitical uncertainties,” he said.