BOP position reverses to a surplus in Q1 2022

Q1 2022 Developments

The country’s balance of payments (BOP) position registered a surplus of US$495 million in Q1 2022, a reversal from the US$2.8 billion deficit in the same quarter last year.

Current Account. The current account registered a deficit of US$4.8 billion (equivalent to -5.0 percent of the country’s GDP) in Q1 2022, which is significantly higher than the US$32 million deficit recorded in the same quarter in 2021. This development resulted mainly from the widening of the trade in goods deficit and the slight decline in net receipts in services. This was partly muted by the increase in net receipts in the primary income and secondary income accounts.

Capital Account.  The capital account recorded net payments amounting to US$20 million in Q1 2022, a reversal from the US$17 million net receipts recorded in the same quarter in the previous year.  Gross acquisitions of non-produced non-financial assets (e.g., patents, trademarks, and copyrights) were notably higher at US$42 million in the first quarter of 2022 vis-à-vis the US$3 million comparable figure recorded in Q1 2021.

Financial Account.  The financial account registered net inflows (or net borrowing by residents from the rest of the world) amounting to US$4.9 billion in Q1 2022, a reversal from the US$4.1 billion net outflows in the same quarter last year. This outcome was mostly driven by the reduction in net outflows of portfolio investments alongside the increase in net inflows from the other investment account and trading of financial derivatives. This was tempered in part by the lower net inflows in the direct investment account.

Gross International Reserves

The country’s gross international reserves amounted to US$107.31 billion as of end-March 2022, higher than the US$104.48 billion level registered as of end-March 2021. At this level, the reserves adequately covered 9 months’ worth of imports of goods and payments of services and primary income. It was also equivalent to 7.7 times the country’s short-term external debt based on original maturity and 4.7 times based on residual maturity.  The year-on-year increase in reserves reflected inflows largely from the National Government’s net foreign currency deposits with the BSP and BSP’s income from its investments abroad.  By asset component, the bulk of international reserves were held in the form of foreign investments (85.2 percent), gold (8.8 percent), and the rest in aggregated holdings of Special Drawing Rights (3.6 percent), foreign exchange (1.6 percent), and reserve position in the Fund (0.7 percent).

Exchange Rate

The peso dollar averaged P51.53/US$1 in the first quarter of 2022. On a quarter-on-quarter basis, the peso depreciated by 2.1 percent from an average of P 50.45/US$1 in Q4 2021. Similarly, the peso depreciated by 6.3 percent from an average of P 48.28/US$1 recorded in the same period a year ago.  Among the factors that weighed on the local currency were the sustained momentum of merchandise trade imports, which continued to outpace exports; continued increase of global oil prices amid the ongoing war between Russia and Ukraine; and expectations of hawkish stance from the US Federal Reserve amid inflation risks.  The peso was more volatile during the quarter in review as the standard deviation of the peso’s movement at P0.46 was higher than the P0.26 posted in Q1 2021.

For the first quarter of 2022, the peso gained external price competitiveness against the basket of currencies of major trading partners (MTPs), trading partners in advanced (TPI-A) and developing (TPI-D) economies as indicated by the decreases in both nominal and real effective exchange rate indices.