The country’s gross international reserves fell to a four-month low of $99.4 billion as of end-June 2023 from $100.6 billion in the previous month as the balance of payments incurred a big shortfall, data from the Bangko Sentral ng Pilipinas show.
It also declined from $100.85 billion registered in June 2022.
The BSP said despite the drop, the latest GIR level represented a more than adequate external liquidity buffer equivalent to 7.3 months’ worth of imports of goods and payments of services and primary income.
It was also about 5.7 times the country’s short-term external debt based on original maturity and 4.0 times based on residual maturity.
The country’s capacity to meet imports requirements have been declining since 2020 when the GIR reached a record $110 billion which was equivalent to 12-month import cover. This was also partially due to a significant growth in imports as the economy reopened, resulting in widening trade and balance of payments deficit.
The BSP said that in June 2023, the BOP incurred a deficit of $606 million, the widest in four months but lower than the $1.6-billion shortfall a year ago, as the government settled some of its foreign debts.
The June BOP deficit was the biggest since the $895-million shortfall in February 2023.
“The BOP deficit in June 2023 reflected outflows arising mainly from the national government’s net foreign currency withdrawals from its deposits with the BSP to settle its foreign currency debt obligations and pay for its various expenditures,” the BSP said in a statement.
The BSP said despite the large deficit in June, the cumulative BOP position recorded a surplus of $2.3 billion in the first six months of the year, a reversal from the $3.1-billion deficit a year earlier.
“Based on preliminary data, the cumulative BOP surplus reflected inflows that stemmed mainly from personal remittances, net foreign borrowings by the national government, trade in services, and foreign direct investments,” the BSP said.
Michael Ricafort, chief economist of Rizal Commercial Banking Corp., said the BOP data for the coming months could improve with the continued growth in the country’s structural inflows.
“Going forward, the country’s net foreign direct investments could still pick up, after coming from among the highest levels since the pandemic started, as the economy reopened towards greater normalcy. [The] Philippine economy [is] still expected to have one of the fastest economic growth rates in the region,” Ricafort said.
The BSP expects the full-year BOP to result in a deficit of $1.2 billion in 2023 and $500 million in 2024.
The Monetary Board of the BSP approved a new set of 2023 and 2024 BOP projections on June 15, 2023 that incorporated the latest available data and recent emerging developments.
It expects cash remittances to grow 3 percent this year and next on sustained demand for overseas Filipino workers abroad as they fill in for the labor shortage resulting from pandemic-induced job losses and aging populations in host economies.
The Monetary Board also reduced the estimate for net foreign direct investments to $9 billion from $11 billion for 2023, and to $11 billion from $12 billion for 2024 in line with the slowdown in non-residents investments globally.
The BOP deficit hit $7.3 billion last year, a turnaround from the $1.3-billion surplus recorded in 2021.
The BSP expects GIR to settle at $100 billion by end-2023 and $102 billion by end-2024.