The Philippines recorded a balance of payments (BOP) surplus of $62 million in July 2024, a reversal from the $53 million deficit posted in July 2023.
The BOP surplus in July 2024 was mainly due to inflows from the net income of the Bangko Sentral ng Pilipinas’ (BSP) investments abroad and the National Government’s (NG) net foreign currency deposits with the BSP.
The Balance of Payments (BOP) is a comprehensive record of a country’s economic transactions with the rest of the world over a specific period. It includes all transactions between residents of the country and non-residents, and it consists of three main components:
- The Current Account – This tracks trade in goods and services, income from foreign investments, and transfers like foreign aid.
- The Capital Account – This monitors capital transfers and the acquisition or disposal of non-produced, non-financial assets.
- The Financial Account – This records investments in financial assets, such as foreign direct investment (FDI), portfolio investment, and other investments like loans or bank deposits.
The BOP surplus indicates that the total inflows of money into the Philippines from the rest of the world exceeded the outflows by $62 million during July 2024.
A BOP surplus generally suggests that the country is a net lender to the world, while a deficit would imply it is a net borrower.
The July surplus brought the year-to-date BOP level to a $1.5 billion surplus, lower than the $2.2 billion surplus recorded in January-July 2023.
Preliminary data attribute this cumulative surplus to a narrowing trade deficit in goods, alongside continued net inflows from personal remittances, foreign direct investment, trade in services, net foreign borrowings by the national government, and foreign portfolio investments.
The BOP position contributed to an increase in the country’s gross international reserves (GIR), which rose to $106.7 billion as of end-July 2024, up from $105.2 billion at end-June 2024.
The GIR are crucial as they act as a buffer to ensure the country can meet its international payment obligations, such as paying for imports or servicing foreign debt, especially in times of economic uncertainty.
The rise in the GIR to $106.7 billion indicates an improvement in the country’s financial stability and ability to handle external shocks.
The GIR level also represents an external liquidity buffer equivalent to 7.9 months’ worth of imports of goods and payments for services and primary income.
Moreover, it is about 6.1 times the country’s short-term external debt based on original maturity and 3.8 times based on residual maturity.
