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By Beatrice M. Laforga, Reporter
The balance of payments (BoP) registered a surplus of $ 8 million in July, the smallest in more than seven years, amid an increase in the inflows of external loans from the National Government to finance its response to the coronavirus pandemic, according to the central bank of the Philippines.
The July figure was less than the surplus of $ 248 million in July last year and the excess of $ 80 million in June. The payment position has been in surplus for four consecutive months.
“The balance of payments surplus in July 2020 mainly reflected the inflows of the National Government’s external loan funds that were deposited in the BSP, as well as the BSP’s income from its investments abroad,” said the central bank in a statement Friday.
He said this was partially offset by withdrawals of foreign currency by the government to pay off part of its foreign debt that matures that month.
The seven-month balance of payments surplus has fallen 18% to $ 4.12 billion from a year earlier.
The central bank also attributed the balance of payments surplus to the lower merchandise trade deficit, in addition to external loans between April and July.
“These positive results completely canceled out the impact of higher net outflows of foreign portfolio investment and lower net inflows of foreign direct investment, trade in services and personal remittances,” said the BSP.
The government has raised $ 8.83 billion from foreign sources through Aug. 27 to support its battle against the coronavirus, according to data from the Finance department.
The central bank expects the overall balance of payments position to register a surplus of $ 600 million by the end of the year, or equivalent to 0.2% of gross domestic product.
Ruben Carlo O. Asunción, chief economist at UnionBank of the Philippines, Inc. attributed the smaller surplus to the sluggish economy.
The country plunged into a recession in the first half after economic output contracted 16.5% in the second quarter. The economy is expected to contract 5.5% this year.
“This describes the lack of economic activity despite the fact that it is largely good, because the balance of payments is in surplus,” Asunción said.
“However, the balance of payments includes the trade balance, foreign portfolio investments, and government operations and transactions in foreign currency,” he said in an email. “It can be assumed that the benefits of a healthy balance of payments are not being maximized due to economic growth and the subdued outlook.”
GOLD TRADE
Also on Friday, Diokno said the central bank would cut its gold reserves to 10% of gross international reserves from 12%.
“Right now, we can buy from the small miners,” he told a budget hearing in the House of Representatives. “But we are not actively buying in the foreign market,” he added in Filipino.
“Our reserves are so large that we don’t have to buy any more gold at the moment,” Diokno said. “In terms of policy, we have an excess of gold as part of gross international reserves,” he said in a mix of English and Filipino.
Gold has surpassed $ 2,000 an ounce on the global market, and some traders fear a correction, but many analysts predict more gains as the global coronavirus pandemic prompts investors to buy the relative safety of gold.
“Due to the attractiveness of gold trading now due to its high price, in response to recent developments, the Monetary Board decided to move from passive to active trading,” Diokno said in a mobile phone message.
The central bank’s 10% gold holdings are based on World Bank recommendations, he said. “The BSP has always taken an opportunistic position in our reserve management.” – with Luz Wendy T. Noble
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