Revenues from Philippine BPO companies and remittances from overseas Filipino workers (OFWs) continue to offset the growing trade deficit, according to Bangko Sentral ng Pilipinas (BSP) governor Nestor A. Espenilla, Jr.
The central bank chief said the country’s balance of payments (BoP) is still manageable even while in deficit. External payments were at a $136-million deficit in 2017's first five months, reversing the $216 million surplus posted in last year.
“Robust remittances from OFWs and ample receipts from the BPO sector continue to fuel economic growth,” said Espenilla.
Balance of payments is used to track transactions between the Philippines and the rest of the world within a period. A deficit shows that funds that left the economy offset funds that came in.
The Philippine Statistics Authority (PSA) reported a $2.753 billion balance of trade deficit in May that is over five times bigger than 2016’s $2.24 billion. BSP deputy governor Diwa C. Guinigundo said May’s $59-million BoP deficit was due to payments made by the government to settle external debt and the central bank’s countermeasures against foreign exchange volatility.
Espenilla explained that rapidly growing imports are not unusual for a growing economy like the Philippines. Strong macroeconomic fundamentals and remittance inflows continue to support the country’s external position.
Remittances reached $9.036 billion from January to April 2017, 4.2 percent higher than that $8.67 billion recorded during the same period last year. Meanwhile, business process outsourcing (BPO) receipts reached $5.5 billion in the first quarter of this year, up 9.9 percent from the $5 billion posted in Q1 2016.
The central bank expects the country’s BoP position to settle at a $500-million deficit in 2017, equivalent to 0.2 percent of the gross domestic product (GDP). Last year, the BoP was at $420-million deficit or 0.1 percent of the GDP.