Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort has projected the country’s balance of payments (BOP) surplus will surge further in the coming months partly due to recovery in foreign direct investments (FDIs), foreign portfolio investments, and remittance inflows.
BOP refers to the balance of money coming in and out of a country within a given period. The projection came on the heels of a Bangko Sentral ng Pilipinas (BSP) recent report that the November 2020 BOP surplus hit US$1.47 billion, which brought the year-to-date level to USD11.79 billion.
Ricafort noted that while the November BOP surplus is lower than the previous month’s US$3.44 billion, it is almost among the eight-year highs and is decidedly higher compared to the year-ago’s USD541 million surplus.
Aside from FDI inflow hike. Ricafort said narrower trade deficit also boosted the country’s BOP position, noting that exports are back to pre-Covid levels while imports growth remains low.
He said proceeds from government’s foreign borrowings, partly due to increased requirements to finance pandemic-related spending, also boosted the BOP position.
Ricafort mentioned other factors that support the BOP position, along with the gross international reserve (GIR), including revenues from the business process outsourcing (BPO) sector, income of BSP’s investments overseas and gains from foreign exchange operations, and other income from abroad.
“BOP surpluses could be sustained at relatively high levels as the inflows is US dollars from the aforecited inflows could still be sustained in the coming months, consistent with and helping GIR reach new record highs,” he added.
BSP records show that the country’s foreign reserves to date stands at a record-high US$104.82 billion, which is equivalent to about 11.2-months’ worth of imports of goods and payments of services and primary income.
Ricafort said “sustained BOP surpluses fundamentally lead to record high gross international reserves (GIR) which also structurally support the recent peso parity gains against the US dollar.