The country’s transactions with the rest of the world, more known as the balance of payments (BOP), was seen improving over the near horizon based on latest data showing significantly improved cash remittance data from millions of overseas Filipinos.
The imbalance in the BOP was seen corrected by more recent data showing accelerating remittance flows ably making up for the trade imbalance of $2.1 billion in March this year, a widening of the trade gap from only $1.75 billion a year earlier.
Latest readings by local economists indicate and improving BOP balance in which the trade deficit was seen offset “almost one for one” by resurging cash remittances.
Remittances showed signs of slowing down in 2016, registering three months of contraction in 2016. This generated concern for analysts and experts on the likelihood of remittances to help boost the country’s external payments position.
In the first three months this year, remittances posted growth averaging 7.7 percent, higher than last year’s 3.2-percent expansion in the same three-month period. The growth of remittances in the first quarter was also significantly higher than the 5-percent growth last year and the 4 percent assumed for this year.
Aside from the steady flow of dollars from overseas Filipino workers, economists also clearly said the Philippines had a “deluge of foreign funds” pouring back in the form of purchases in the local equities market.
Economists further noted in April that funds exiting the Korean and Indonesian stock markets were subsequently redeployed in the Philippines and Thailand, indicating confidence in the macroeconomic dynamics of the country.
“The influx of foreign flows helped the peso to strengthen. The flows in April and in May correspond to the peso’s reversal of fortunes,” economists said.
The Bangko Sentral ng Pilipinas (BSP) on Friday reported the BOP reverting to surplus territory in April to $917 million. This reduced the deficit to only $78 million from the previous month’s $994-million BOP gap.
BSP Deputy Governor for the Monetary Stability Sector Diwa C. Guinigundo said it “very encouraging” the April BOP position reverted to a surplus and helped damp the cumulative BOP shortfall in the first four months this year.
“While the data on the actual and specific BOP components have yet to be released, we expect the support to be coming from the recovery in merchandise exports, sustained OFW remittances and BPO revenues and additional inflows from tourism and foreign investments,” Guinigundo said.
Economists also said that going forward, the peso should continue to be supported as long as the Philippines continue to attract foreign inflows.
“The peso will be captive to how foreign flows perceive our markets. With strong growth still seen in the Philippines, we can expect some flows into the Philippines if we sustain our growth momentum,” economists said.