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On the back of OFW remittance inflows, the BOP status is expected to improve.

Last November, the balance of payment (BOP) position went into deficit, but an economist predicts a reversal in the coming months, owing in part to seasonal remittance inflows during the Christmas holidays.

Last month, the Bangko Sentral ng Pilipinas (BSP) announced a USD123 million BOP deficit, down from a USD1.47 billion surplus the month before, bringing the year-to-date surplus to USD353 million.

In a report released on Tuesday, Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort cited BSP data to say that the BOP deficit was partly caused by net payment of the country’s foreign currency-denominated liabilities and a bigger trade imbalance.

“However, with the seasonal surge in OFW (overseas Filipino workers) remittances and conversion to pesos in preparation for the Christmas season, (which is) likely to culminate in December 2021,” he said, BOP figures could yet improve.

Other factors influencing the BOP’s position, according to him, are banks’ and corporations’ planned fund-raising activities until January next year, preparations for a further reopening of the domestic economy, increased borrowings ahead of an expected interest rate hike in the coming months, and hedging ahead of the national elections in May 2022.

These efforts, according to Ricafort, “may imply certain foreign investment inflows that, from a cash flow viewpoint, could be contributed to the country’s BOP and gross international reserves (GIR).”

“Furthermore, BOP data may improve beginning December 2021-January 2022, in light of expected increases in OFW remittances and inflows of foreign aid/assistance from abroad/international community into the country, particularly for areas hard hit by Typhoon Odette for reconstruction/rebuilding/rehabilitation of damaged homes, businesses, establishments/institutions/facilities, infrastructure, and other properties,” he added.

The Balance of Payments (BOP) is a detailed analysis of a country’s entire dealings with the rest of the world during a given time period.

Due to the discovery of novel coronavirus disease 2019 (Covid-19) types that are projected to impede economic recovery, monetary authorities have lowered the central bank’s 2021 BOP surplus prediction to USD1.6 billion from USD4.1 billion before.

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