THE surplus from the country’s dollar transactions against the rest of the world in the first 10 months of 2020 surpassed the already revised projection for the year despite the economic disruptions brought by the pandemic.
Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno told reporters on Thursday that the country’s balance of payments (BoP) for the January to October period yielded a surplus of $10.3 billion.
The BoP is usually considered an important economic indicator in an economy as it shows the level of earnings or expenses of the Philippines with its transactions with the world. A surplus means that the country made more dollar earnings than its expenses during the period.
The 10-month BoP surpassed the $8.1-billion target by the end of 2020. That was just readjusted and announced last month. It also surpassed the total BoP surplus for the entire 2019.
Last year’s BoP surplus for the first 10 months of the year was at $5.7 billion.
The BSP attributed the current BoP surplus to the higher foreign borrowings made by the national government to support the economy during the pandemic.
Aside from the borrowings, the BSP said lower merchandise trade deficit and inflows from foreign direct investments (FDI), remittances and trade in services also contributed to the surplus.
Latest data show that on average in the first eight months of the year, the total level of FDIs is still 5.6 percent lower at $4.4 billion compared to the $4.7 billion last year.
Meanwhile, latest data on cash remittances show that Filipino migrant workers sent $21.89-billion remittances in the first nine months of the year. This is 1.4 percent lower than the total money they sent in January to September last year.
In October alone, the country’s BoP surplus hit $3.4 billion, up from the previous month’s $2.1-billion surplus.
Good or bad?
Just last week, the BSP governor said the country’s external accounts—which is largely covered by a country’s BoP data—is a strong positive indicator that the Philippines is on its way to recovery.
“As we monitor the impact of the pandemic on the external accounts, it can be observed that the effects were mostly felt during the second quarter of 2020, particularly during the months of April and May, as stricter lockdown measures were imposed by the government as part of its efforts to fight the spread of the virus,” Diokno earlier said.
“As we entered into the third quarter of the year, preliminary data from July to September suggest that the worst is over,’’ he added, citing the strong BoP surplus in the first nine months of the year.
However, former BSP Deputy Governor Diwa Guinigundo, in a recent forum, warned of premature statements like “the worst is over” as it poses dangers to the economy.
“The balance of payments surplus position actually reflects the weakness of the Philippine economy. It reflects the lower demand for imports—which is bad rather than strong exports of both goods and services—as well as the huge availment of foreign loans by the government and the private sector,” he said.
Unionbank chief economist Ruben Carlo Asuncion said that the important indicator is whether the BoP gains make their way to the real economy.
“In terms of BoP accounting, the important thing that I look for is the translation of these numbers into meaningful and relevant economic activity. Does the level, even if it is a deficit and a growing one, provide jobs and increase individual incomes of the population?” he said in a response to BusinessMirror’s query.
“For me, it doesn’t really matter whether it is a surplus or a deficit, as long as it works through the real economy and makes people feel better about themselves in general,” he added.