BoP surplus hits $1.27 billion in March

The Philippines’ balance of payments (BoP) surplus hit a two-month high of $1.27 billion in March, mainly driven by foreign currency deposits from the National Government and the central bank’s investments abroad.

Data released by the Bangko Sentral ng Pilipinas (BSP) on Wednesday showed that the March surplus was bigger than the $754-million surfeit a year earlier. This is also a turnaround from the $895-million deficit in February.

This is also the biggest BoP surplus since the $3.08-billion surfeit in January.

“The BoP surplus in March 2023 reflected inflows arising mainly from the National Government’s (NG) net foreign currency loans, which were deposited with the BSP, and net income from the BSP’s investments abroad,” the central bank said in a statement.

The BoP gives a glimpse into the country’s transactions with the rest of the world. A deficit means more funds left the country, while a surplus shows that more money came in.

“The BoP surplus in March was likely supported by a narrowing trade gap. Latest trade data showed that the deficit in February was at the lowest in four months amid a weaker outturn in both exports and imports,” China Banking Corp. Chief Economist Domini S. Velasquez said.

Preliminary data from the Philippine Statistics Authority (PSA) showed the trade gap shrank to $3.88 billion in February, the smallest since the $3.72-billion deficit in November 2022.

Merchandise exports fell by 18.1% year on year to $5.08 billion, while imports slipped by 12.1% to $8.95 billion from a year earlier.

At its end-March level, the BoP reflects a final gross international reserve of $101.5 billion, up by 3.4% from the $98.2 billion a month earlier.

This is enough to cover 6.1 times the country’s short-term external debt based on original maturity and 4.2 times based on residual maturity.

It also represents buffers equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income.

For the first quarter, the BoP position stood at a $3.45-billion surplus, ballooning from the $495-million surfeit in the same period last year.

Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said remittances from overseas Filipino workers contributed to higher BoP inflows.

Cash remittances hit a record high of $32.54 billion in 2022, up by 3.6% from $31.42 billion in 2021.

However, latest BSP data showed remittance growth slowed to 2.4% in February from 3.5% in January, marking the weakest annual growth since 2.3% in July 2022.

“The NG has also continued to borrow resulting to higher net foreign borrowings, probably as buffer for future spendings. Moreover, higher foreign direct investments (FDI) have also contributed to the rising BoP surplus,” Mr. Asuncion said in a Viber message.

Treasury data showed gross borrowings in February surged by 606% from P53.121 billion in the same month a year ago. External borrowings almost doubled to P15.984 billion in February from P8.121 billion in the same month in 2022.

Meanwhile, FDI net inflows plunged 45.7% to $448 million in January from $824 million in the same month a year ago, data from the central bank showed.

“Overall, we think that the BoP may continue to be in surplus, but not for long as the global economic recession risk overhang continues to linger and darken the global economic outlook,” Mr. Asuncion said.

For her part, Ms. Velasquez expects the BoP position to end at a slightly narrower deficit this year as price pressures from the Russia-Ukraine war fade.

“The subdued external outlook as advanced economies continue to face recessionary risk will keep exports weak, but we expect Chinese demand to buoy exports towards the second half of the year,” she said.

Ms. Velasquez said investments abroad may support the BoP position amid the recent implementation of investor-friendly reforms.

The central bank expects the BoP position to end the year with a $1.6-billion deficit, narrower than the $7.3-billion deficit in 2022.

Source: Business World

France seeking to expand trade, investment with PHL

France has identified the Philippines as a “priority area” for expanding trade and investment, its ambassador to Manila said.

“Economic development and economic relations between our two countries are extremely important,” French Ambassador Michèle Boccoz said at a ceremony marking the 75 years of diplomatic relations between the two countries on Wednesday.

“Our companies are really willing to be more active and more present, and we hope that more Filipino companies will invest in France, and (for) more Philippine cooperation in France and more trade,” she added.

Foreign Affairs Deputy Assistant Secretary Rosario P. Lemque said diplomats, officials, and members of the private sector from both countries “will work together in several areas of mutual interest, build cooperation in these areas, and collaborate to develop and advance this cooperation with the aim of building resilient lives for a stronger Philippines and stronger France, despite some ongoing realities in international relations, and what everyone hopes to be the tail end of the pandemic.”

She noted various agreements in the pipeline involving defense, tourism, and cybersecurity.

The French ambassador said energy was an area of interest, noting the need for both countries to be assured of cheap energy sources.

Renewable energy and other non-polluting energies that do not worsen greenhouse gas emissions are also under discussion, she added.

Ms. Boccoz also sought increased bilateral defense and maritime cooperation.

Infrastructure through public-private partnerships were also of interest to the French, calling this a “new way” of working with the Philippines.

France is also interested in agricultural collaboration to address food security concerns due to “the impact of the Ukraine conflict on food prices, and also on supply chains and general capacity.”

Companies from the electronics and pharmaceuticals sector can also meet to build partnerships, Ms. Boccoz said.

Diplomatic relations between the Philippines and France began in 1947 after a Treaty of Amity was signed in Paris.

Source: BusinessWorld

2021 trade deficit widest in 3 years

The Philippines’ trade deficit further widened to a three-year high in 2021 as imports continued to outpace exports amid a coronavirus pandemic, latest data from the Philippine Statistics Authority (PSA) showed.

Final results of the PSA’s international trade data showed the value of outbound shipment of goods jumped by an annual 14.5% to $74.653 billion last year, a turnaround from the 8.1% drop in 2020.

This was the fastest since the 19.7% increase in exports in 2017.

Imports likewise surged by a record 31.3% year on year to $117.879 billion from $89.812 billion. Last year’s import growth was a turnaround from the 19.5% decline in 2020.

Last year’s import growth surpassed the 30% full-year target set by the Development Budget Coordination Committee — the inter-agency body that sets the government’s macroeconomic assumptions and targets. Exports, meanwhile, missed the 16% goal.

Both exports and imports were at record levels last year, according to the PSA data dating back to 1991.

The country remained a net importer as the trade balance — the difference between merchandise exports and imports — reached a $43.226-billion deficit last year, wider than the $24.597-billion gap in 2020.

This was the widest trade gap since the $43.533-billion deficit in 2018.

The last time the Philippines became a net exporter was in 1999 and 2000 with trade surpluses of $4.294 billion and $3.587 billion, respectively.

Total trade — the sum of exports and imports — rose by 24.2% to $192.532 billion from $155.026 billion in 2020.

ING Bank N.V. Manila Branch Senior Economist Nicholas Antonio T. Mapa said the jump in trade was due to base effects because 2020 was “an abnormal year” due to the strict lockdowns that caused supply chain disruptions.

He said 2021 was “an exceptional year,” as the economy gradually reopened. Trade levels in the past two years were still below 2019 levels.

“Although we did see a bit of catch up in terms of restocking of inventory and return to some level of normalcy for business activity, the pace of global trade had yet to fully normalize,” he said.

“One reason for this was the fact that the Philippines still faced two lockdown episodes in 2021,” he added, referring to the strict lockdowns implemented to curb a surge in coronavirus disease 2019 (COVID-19) infections in April and August last year.

The country experienced an Omicron-driven COVID-19 surge in January this year, but infections have considerably declined since then. Metro Manila and other areas have been under the most lenient alert level since March.

“The export sector was dominated once more by the mainstay electronics sector, which not only benefited from base effects but also from the stark pickup in demand for these products due to the global chip shortage,” Mr. Mapa said.

“Imports were dominated by the spike in fuel imports, driven by an increase in both volume and value.”

Manufactured goods, which accounted for 82.9% of exports last year, rose by 15% annually to $61.867 billion.

Electronic products, which made up 56.9% of the total export receipts and almost a third of manufactured goods, grew by 12% to $42.495 billion.

Semiconductors, which accounted for 41.7% of exports and more than a fourth of electronic products, increased by 7.4% to $31.161 billion.

Exports of mineral products went up by 16% to $5.908 billion last year from $5.093 billion in 2020. These goods accounted for 7.9% of exports last year.

It was followed by other manufactured goods (up 25.7% annually to $4.528 billion) and other mineral products (up 25.7% to $2.527 billion).

Imports of raw materials and intermediate goods, which accounted for 40.7% of the total import bill last year, jumped by 32.7% to $47.988 billion.

With a 30.1% share of the total, capital goods climbed by 19.2% to $35.471 billion from $29.752 billion.

Consumer goods, which accounted for about 16% of the total bill, rose by 22% to $18.852 billion.

The United States was the main destination of the country’s products, with a 15.9% share at $11.849 billion. It was followed by China (15.5% at $11.553 billion) and Japan (14.4% at $10.725 billion).

China was the country’s major source of imports with $26.799 billion, accounting for 22.7% of the total. It was followed by Japan’s $11.108 billion (9.4% share) and South Korea’s $9.351 billion (7.9%).

The Philippines had trade surpluses with Hong Kong ($6.663 billion), the United States ($4.098 billion) and the Netherlands ($1.683 billion).

It had the widest trade deficits with China ($15.246 billion), Indonesia ($7.579 billion) and South Korea ($6.777 billion).

Mr. Mapa expects demand for electronics this year to remain robust, but it could moderate as global growth slows due to the Russia-Ukraine war. Demand for food exports might rise this year, he added.

“This year, we face new headwinds in the form of renewed supply chain bottlenecks and the disruption brought about by the Ukraine war. Both the International Monetary Fund and World Bank have trimmed their respective global growth projections which suggests that global trade will likely moderate in the near term,” he said.

The IMF raised its Philippine economic growth forecast this year to 6.5% from 6.3%. The World Bank cut its outlook for the country to 5.7% from 5.8% due to the impact of Russia’s invasion of Ukraine.

Both projections fell below the government’s 7-9% target for 2022.

The government expects exports and imports to grow by 6% and 10% this year.

Source: Business World