Philippines’ overall BOP position posts US$2.43 billion surplus in May 2020; GIR level at all-time high of US$93.29

The Philippines’ overall balance of payments (BOP) position – a measure of the country’s economic transactions with the rest of the world – posted a surplus of US$2.43 billion in May 2020, about 2.6 times higher than the US$928 million BOP surplus recorded in the same month last year.

The BOP surplus in May 2020 reflected mainly the inflows arising from the National Government’s foreign currency deposits with the Bangko Sentral ng Pilipinas (BSP) as well as the BSP’s foreign exchange operations and income from its investments abroad. These inflows were partially offset, however, by the foreign currency withdrawals made by the NG to pay its foreign currency debt obligations during the month in review.

For the second consecutive month, the cumulative BOP position recorded a surplus, registering US$4.03 billion by May. Notwithstanding, the five-month cumulative BOP surplus this year was lower than the US$5.19 billion surplus recorded a year ago. The current BOP surplus was supported mainly by foreign borrowings by the National Government in April and May, coupled with lower merchandise trade deficit and by sustained net inflows of personal remittances from overseas Filipinos.  These inflows fully negated the impact of lower trade in services receipts, the net foreign portfolio investment outflows and lower foreign direct investments inflows.

The BOP position reflects an all-time high final gross international reserves (GIR) level of US$93.29 billion as of end-May 2020. At this level, the GIR represents an ample external liquidity buffer, which is equivalent to 8.4 months’ worth of imports of goods and payments of services and primary income. Moreover, it is also about 7 times the country’s short-term external debt based on original maturity and 4.6 times based on residual maturity.^[1]

¹   Short-term debt based on residual maturity refers to outstanding external debt with original maturity of one year or less, plus principal payments on medium- and long-term loans of the public and private sectors falling due within the next 12 months.