THE country’s balance of payments (BOP) position swung to a $1.966 billion deficit in March from a $3.09 billion surplus in February, the Bangko Sentral ng Pilipinas (BSP) said yesterday.
In a statement issued April 21, the central bank said the deficit was brought about by a reduction in the national government’s foreign currency deposits under the country’s gross international reserves (GIR) to meet its external debt obligations.
The BSP also had to dip into its foreign reserves to fund its operations in the foreign exchange market.
Preliminary data also showed the year-to-date deficit reflected mainly the country’s widening trade in goods deficit.
“This decline was partly muted, however, by the continued net inflows from personal remittances, foreign direct investments and foreign borrowings by the national government,” the BSP said.
The March deficit was also in contrast to the $1.17 billion surplus recorded in March 2024. It also brought the three-month cumulative gap to $2.96 billion, a reversal from the $238 million surplus in January to March 2024.
The BOP is a summary of the country’s economic transactions with the rest of the world in a specific period.
Lower reserves
The central bank said the payments deficit in March mirrors a decrease in the final GIR to $106.7 billion from $107.4 billion as
of the end of the preceding month of February.
Still, the latest GIR level provides a strong external liquidity buffer equivalent to 7.4 months worth of imports of goods and payments of services and primary income, it said, adding that it also covers about 3.6 times the country’s short-term external debt based on residual maturity.
The GIR consists of Philippine investments abroad, gold and foreign exchange holdings, as well as the country’s reserve position in the IMF and its special drawing rights.
Moderating receipts
Philippine Institute for Development Studies senior research fellow John Paolo Rivera, explaining other factors that caused the deficit, said earlier inflows such as borrowings, remittances, or investment-related receipts, possibly moderated in March.
The deficit emphasizes the sensitivity of the country’s external position to global market movements and domestic financing needs, he said.
“Moving forward, careful management of external debt and trade competitiveness will be crucial to maintaining external stability,” Rivera added.
Contributing factors
Michael Ricafort, RCBC’s chief economist, cited as contributing factors to the BOP deficit in March the country’s persistent trade deficit and the monthly declines in foreign investments because of US President Donald Trump’s reciprocal tariffs.
The latest BOP and GIR data could have been supported by continued growth in the country’s structural US dollar inflows, such as OFW remittances, BPO revenues, exports, foreign investments, and foreign tourism revenues, he said.
“In the coming months, the BOP data could still improve with the continued increase in the country’s structural inflows in terms of the continued year-on-year growth of OFW remittances, BPO revenues, export revenues and foreign tourism receipts though offset by the country’s continued trade deficit,” Ricafort added.
For RCBC, the Philippine economy is still expected to have one of the fastest growth rates in the region.
