BOP deficit hits $2.019 billion in February as PHL pays rising foreign debt

THE Philippine economy continued to bleed dollars in February as the rising dollar obligations of the national government far outweighed the country’s foreign-currency income during the month.

The Bangko Sentral ng Pilipinas (BSP) reported on Friday that the country’s Balance of Payments (BOP) posted a deficit of $2.019 billion in February.

This is the largest monthly BOP deficit that the country has incurred in more than two years or since September 2018, when it hit a deficit of $2.696 billion.

The February deficit is also larger than January’s deficit of $752 million and February 2020’s deficit of $516 million.

“The BOP deficit in February 2021 reflected outflows, arising mainly from the BSP’s reserves management operations and the foreign-currency withdrawals of the national government [NG] from its deposits with the BSP as payment for its foreign-currency debt obligations,” the BSP said.

The BOP is usually considered as an important economic indicator in an economy as it shows the level of earnings or expenses of the Philippines with its transactions with the world. A deficit means that the country made more dollar expenses than its earnings during the period.

The deficit could have been larger, according to the BSP, if not for its foreign-exchange operations and income from its investments abroad.

Just recently, BSP Governor Benjamin Diokno announced that they have decided to revise their BOP projections upward for 2021.

Diokno said they now expect the country’s BoP to hit a surplus of $6.2 billion by the end of this year, doubling the earlier projection of $3.3 billion. This represents 1.6 percent of the country’s gross domestic product (GDP).

For next year, the BSP said the BOP is expected to taper off to a surplus of $3.8 billion.

For the BSP’s projections to come to fruition, the Philippine economy should start incurring a monthly surplus of at least $820 million per month for the rest of 2021.

In 2020, the country’s BOP surplus hit $16 billion.

Image credits: Nonie Reyes