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Friday, March 29, 2024

Trade gap, loans push Q1 BOP deficit to $2.84 billion

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THE Philippines continued to bleed dollars in the first three months of the year, due largely to the country’s trade deficit and the national government’s dollar demand to repay foreign loans.

The Bangko Sentral ng Pilipinas (BSP) reported on Thursday that the country’s Balance of Payments (BoP) hit a deficit of $2.84 billion in the first three months of the year.

The first quarter BoP deficit of the country is larger than the $68- million deficit in the January-March period in 2020.

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 BSP blamed the deficit on the national government’s net repayments of its foreign loans and the country’s merchandise trade deficit.

In March alone, the country’s BoP deficit hit $73 million, a reversal of the $448-million surplus seen in March last year.

This March’s deficit, however, is significantly smaller compared to the $2.02-billion deficit seen in February 2021.

Rizal Commercial Banking Corporation (RCBC) economist Michael Ricafort said the country’s BoP position could improve in the coming months on the back of sustained remittances from Filipino migrant workers and improved inflow of foreign direct investments (FDI) after the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) law.

Ricafort also said continued growth in the country’s business-process outsourcing (BPO) sector amid the need for greater outsourcing worldwide during the pandemic could also help boost the country’s external position.

He thinks the latest rating actions on the country could help boost sentiment and impact the BoP positively later this year.

“The latest credit rating upgrade on the Philippines to the first-ever A-credit ratings by Japan Credit Ratings Agency and the affirmation of the country’s credit ratings by R&I, Fitch, Moody’s, and S&P are signs of resilience and improved international investor confidence on the Philippines, somewhat defying the economic challenges brought about by Covid-19,” Ricafort said.

“Thus, these reflect the Philippines’s improved economic and credit fundamentals, as well as improvements in fiscal performance in recent years that could help attract more and bigger roster of international investments and international loans at much lower cost and with better terms into the country,” he added.

Read full article on BusinessMirror

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