Connect with us

Hi, what are you looking for?

News

BSP sees wider BoP, current account deficits this year on weaker global outlook

PIXABAY

THE BANGKO SENTRAL ng Pilipinas (BSP) expects the country to post a wider balance of payments (BoP) deficit this year due to a weaker global growth outlook that could affect trade and capital flows.

The central bank on Friday announced its revised BoP projections for 2022 and 2023 approved during the Monetary Board’s June 16 meeting.

The BoP gives a glimpse of the country’s transactions with the rest of the world at a given time. A deficit shows more funds exited the country than what went in, while a surplus means more money entered the economy.

“The emerging BoP outlook for 2022 and 2023 remains quite circumspect in view of the recent buildup in external risks. Of note is the downgraded global growth outlook following the escalation of the Ukraine-Russia conflict and its international ramifications, most notably the increase in food and fuel prices. The anticipated slowdown of China’s economy could also put pressure on trade prospects,” the BSP said.

“Meanwhile, capital flows could be particularly volatile following the abrupt monetary policy normalization in the US and in other major economies,” it added.

The country’s BoP is now expected to yield a deficit of $6.3 billion this year or equivalent to -1.5% of gross domestic product (GDP), higher than the previous projection of a $4.3-billion gap (-1% of GDP) announced in March.

Latest BSP data showed the country’s BoP stood at a $79-million surplus in the January-April period, a turnaround from the $231-million deficit in the same four months of 2021.

The central bank said it expects a bigger BoP gap this year amid a projected widening of the current account deficit to $19.1 billion (-4.6% of GDP) from the earlier forecast of $16.3 billion (-3.8% of GDP).

This is after it raised its growth projections for imports of goods and services to 18% and 13%, respectively, from 15% and 12% previously amid the recovery of the Philippine economy. Growth forecasts for goods and services exports were maintained at 7% and 11%, respectively.

The BSP maintained its growth forecasts for business process outsourcing (BPO) and travel receipts at 8% and 100%, respectively.

Meanwhile, the BSP maintained its projection for the growth in overseas Filipino workers’ cash remittances at 4% amid rising deployment and expanded channels for sending funds. Cash remittances increased by 2.7% year-on-year to $10.167 billion in the first four months of the year.

The current account deficit was at $4.8 billion in the first quarter, higher than the $32-billion gap seen the year prior, amid a wider trade in goods deficit and the slight decline in net services receipts.

As for the financial account, it is expected to register net inflows of $11.8 billion, higher than the previous projection of $10.9 billion, as the central bank sees a sustained uptrend in foreign direct and portfolio investments.

The central bank expects foreign direct investments (FDI) to end the year at a net inflow of $11 billion, steady from the March outlook, while foreign portfolio investments (FPI) or hot money is now expected to post at $4.5-billion net inflow, higher than the $4 billion the BSP projected in March “fueled in part by the planned issuances of initial public offerings.”

The financial account registered net inflows of $4.9 billion in the first quarter of 2022, a reversal from the $4.1 billion net outflows in the same period last year, amid lower FPI outflows and better inflows from other investment accounts that tempered a decline in net FDI inflows.

Latest BSP data showed total FDI net inflows rose by 2% to $2.43 billion in the first quarter from $2.39 billion during the same period in 2021.

Meanwhile, from January to April, BSP-registered FPIs yielded net inflows of $1.34 billion, a reversal from the $857.44-million net outflow in the same period last year.

Lastly, the country is now expected to end the year with gross international reserves (GIR) of $105 billion, equivalent to eight months of import cover, slightly lower than the previous forecast of $108 billion (8.4 months), “reflecting latest trends as well as the expected rationalization of the national government’s foreign borrowings amid fiscal consolidation efforts.”

GIR was at $103.53 billion as of end-May.

2023 FORECASTS

For 2023, the BSP maintained its forecast of a $2.6-billion BoP deficit, equivalent to -0.6% of GDP, “hinged mainly on expectations of higher inflows in the financial account supported by improved business and consumer sentiment, stronger domestic demand, and continued implementation of business-friendly legislative reforms.”

This is despite its projection of a wider current account deficit of $20.5 billion (-4.4% of GDP) from $17.1 billion (-3.7% of GDP) in March as the country’s trade gap is expected to continue widening.

Meanwhile, the growth outlook for cash remittances was maintained at 4% as base effects are expected to fade and with the recovery of host economies expected to stabilize to pre-pandemic levels, which could boost deployment.

The central bank also kept its growth projections for BPO and travel receipts at 5% and 150%, respectively.

On the other hand, the financial account is expected to register higher net inflows of $16.8 billion in 2023 from $13.4 billion previously as net FDI inflows are now seen at reaching $12 billion from $11.8 billion, while the net FPI inflow projection was maintained at $6.7 billion.

The BSP said the financial account will be boosted by expectations of the Philippines’ sustained growth momentum amid infrastructure improvements and investment-friendly reforms.

Lastly, the central bank lowered its 2023 GIR projection to $106 billion from $109 billion in March on expectations of foreign exchange flows.

“There is also scope to maintain sufficient reserves against possible adverse market volatilities as policy normalizations continue into 2023,” the BSP said.

The central bank noted that growth prospects for 2023 remain “soft” as risks to the external outlook are likely to persist.

“The challenge of dealing with the COVID-19 crisis legacies, the Ukraine-Russia war, as well as global financial tightening continue to dampen prospects for the country’s external sector next year,” the BSP said.

“The BSP will continue to monitor closely emerging external sector developments and risks and how these may impact the BSP’s fulfillment of its price and financial stability objectives,” it added. — K.B. Ta-asan

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!

Latest

News

PHILIPPINE STAR/ MICHAEL VARCAS WASHINGTON D.C. — The United States is seeking to form a coalition of countries to drive negotiations on a global...

News

Buildings are seen along EDSA in Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN By Diego Gabriel C. Robles  THE WORLD BANK (WB) upgraded...

News

Heavy traffic is seen on the southbound lane of EDSA in Cubao, Quezon City. — PHILIPPINE STAR/ MIGUEL DE GUZMAN THE PHILIPPINE auto industry’s...

News

REUTERS THE BANGKO SENTRAL ng Pilipinas (BSP) may deliver a second off-cycle rate hike in early November when the US Federal Reserve is expected...

News

Vendors arrange their goods at a public market in Manila. — PHILIPPINE STAR/ RUSSEL A. PALMA THE ASIAN Development Bank (ADB) is planning to...

Editor’s Pick

With the reversal of the 1.25% rise in National Insurance Contributions happening on the 6th of November, employers across the nation have an opportunity...

You May Also Like

News

BW FILE PHOTO GROSS BORROWINGS by the National Government reached P2.6 trillion as of end-September as it continued to raise funds to respond to...

News

KARASOLAR.COM TENA, Ecuador — Ecuador’s rainforest Achuar people say their ancestors long dreamed of a “fire canoe” or “electric fish” that would let them...

News

REUTERS By Luz Wendy T. Noble, Reporter The country’s foreign exchange buffers slightly increased as of end-October as the value of the central bank’s...

News

COVID-19 has had a significant impact on the mental health of Filipinos across different groups all over the archipelago. From frontline workers, parents balancing...

Disclaimer: Respect Investment.com, its managers, its employees, and assigns (collectively "The Company") do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

Copyright © 2022 Respect Investment. All Rights Reserved.