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BOP in deficit anew, bleeds $1.4 billion in May 2021

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THE Philippines’s balance of payments (BOP) position went back to bleeding dollars in May after a one-month surplus in the previous month, the Bangko Sentral ng Pilipinas (BSP) reported on Wednesday.

Data from the Central Bank showed that the country’s BOP slumped back to a $1.4-billion deficit in May this year, after the $2.6-billion surplus in April. The May 2021 deficit is also a turnaround from the May 2020 surplus of $2.4 billion.

The BOP is usually considered 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 had more dollar expenses than what it earned in foreign currency during the period.

The BSP attributed the May deficit mainly to outflows arising from the foreign currency withdrawals of the national government (NG) from its deposits with the BSP as the NG settled its foreign currency debt obligations and paid for various expenditures.

These outflows were partly offset, however, by the inflows from the BSP’s foreign exchange operations and from the NG’s external borrowings that were deposited with the BSP.

The deficit in May also pushed the cumulative BOP position of the country for the period January to May 2021 to a deficit of $1.63 billion, a reversal of the $4.03-billion surplus recorded in the same period a year ago.

“Based on preliminary data, this cumulative BOP deficit was partly attributed to wider merchandise trade deficit and net outflows of foreign portfolio investments,” the BSP said.

The BSP recently said it expected the country’s BOP to hit a surplus of $7.1 billion by the end of the year. This means the country must incur a monthly average surplus in BOP of $1.2 billion for the rest of the year.

Despite the optimism on the BOP’s recovery, the BSP earlier said the threat of resurgence of Covid-19 cases, the emergence of new variants of the virus and the risk of slower-than-expected vaccine deployment amid supply issues could “cast a shadow” on the projected recovery path of the BOP.

For 2022, the BSP projects overall BOP surplus to settle lower at $2.7 billion, driven mainly by the anticipated narrower current account surplus for the year.

Read full article on BusinessMirror

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