Dollars flood PH’s economy thanks to external government loans and import costs fall

FILE – A man counts US dollar bills at an exchange office in Manila on Oct. 26, 2006. The Philippine central bank said Thursday it was studying whether to allow banks to buy dollars above currently prescribed limits. The peso, trading at 49.895 to the dollar around noon Thursday, has gained 6.46 percent against the dollar so far this year. REUTERS / Romeo Ranoco (PHILIPPINES)

MANILA – Philippines – The surplus dollar flow of the Philippine economy, which has been accumulating every month since the start of the pandemic, increased significantly in September, as the inflow of foreign exchange from government borrowing abroad was added to the fall of the country. import expense.

According to Bangko Sentral ng Pilipinas, the country’s overall balance of payments position registered a surplus of $ 2.1 billion in September 2020, bringing the surplus position for the year to date to $ 6.88 billion.

The seven-month surplus is the highest level on record so far, from the cumulative $ 7.8 billion in inflows recorded at the end of 2019.

“The [balance of payments] the surplus in September 2020 mainly reflected the income from the BSP’s foreign exchange operations and the income from its investments abroad, and the national government’s foreign currency deposits in the BSP, ”said the central bank.

However, these inflows were partially offset by the national government’s payments of its debt obligations in foreign currency.

The balance of payments is the net count of all the country’s transactions with foreign parties, including the import and export of goods, payments for services, short-term and long-term investment inflows or outflows, remittances, among others. A surplus means that the economy is earning more dollars than it is spending, while a deficit represents the opposite, with its corresponding effects on the value of the country’s currency.

The central bank said the cumulative balance of payments surplus of $ 6.88 billion was higher than the surplus of $ 5.57 billion recorded in the same period a year ago.

“Based on preliminary data, the current balance of payments surplus was mainly supported by higher net external loans from the national government and a lower merchandise trade deficit along with sustained net inflows of foreign direct investment, personal remittances and trade in goods. services, “said the agency explained.

The balance of payments position reflects an increase in the final level of gross international reserves of $ 100.44 billion at the end of September 2020 compared to $ 98.95 billion at the end of August 2020.

At this level, the country’s dollar reserves represent a “more than adequate” external liquidity cushion, which can cushion the national economy against external shocks, the central bank said.

This is equivalent to ten months of imports of goods and payments for services and primary income, and it is also approximately nine times the country’s short-term external debt based on original maturity and 5.4 times based on residual maturity.

Earlier this month, the central bank revised up its balance of payments projections amid the expected recovery in local and global economies next year, a smaller trade deficit, the resilience of Philippine remittances abroad and direct foreign investment, and the accumulation of dollar reserves. .

In its revised forecasts, BSP expects the overall balance of payments position to register a surplus of $ 8.1 billion, equivalent to 2.2 percent of gross domestic product, compared to $ 600 million in 2020 and $ 3.4 billion, or 0.9 percent of GDP, in 2021. [ac]

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