CURRENT account deficit projections for 2024 and 2025 were widened by the Bangko Sentral ng Pilipinas (BSP) under new balance of payments (BoP) estimates released on Friday.
The current account — a record of the country’s transactions with the rest of the world — is now expected to have hit a $10.4-billon shortfall last year, up from the $6.8-billion assumption announced in September but still smaller than the 2023 result of $11.8 billion.
The deficit is expected to expand to $12.1 billion this year, substantially wider than the $5.5 billion previously projected.
The Bangko Sentral ng Pilipinas seal is seen along Roxas Boulevard in Manila. PHOTOS BY J. GERARD SEGUIA
The revised 2024 and 2025 forecasts are respectively equivalent to 2.2 percent and 2.4 percent of gross domestic product (GDP), higher than the 1.5 percent and 1.1 percent seen in September.
BoP still positive
The country’s overall BoP position is expected to remain positive, however, and forecasts for last year and this year were raised by the central bank.
The Philippines likely ended 2024 with a BoP surplus of $3.5 billion, the BSP said, equivalent to 0.8 percent of GDP and higher than the September projection of $2.3 billion (0.5 percent of GDP).
The outlook for this year is also higher at $2.1 billion (0.4 percent of GDP), up from $1.7 billion (0.3 percent of GDP) previously.
The expected 2024 surplus, however, is smaller than the $3.7 billion recorded in 2023. It was at $2.1 billion in November based on latest official data.
“The latest set of forecasts points to continued resilience of the country’s overall balance of payments position for 2024 and 2025, while showing a decelerating path relative to the 2023 outturn,” the BSP said in a statement.
“This assessment is underpinned mainly by stable yet moderating global and domestic economic growth prospects; a slowing inflation trajectory across jurisdictions; lingering geopolitical and weather shocks; as well as possible shifts in US trade and investment policies under the incoming Trump administration,” it added.
The central bank said the 2024 BoP projection was adjusted given upward revisions in the forecast for portfolio investments, which compensated for likely lower foreign direct investments (FDI).
Net FDI is now expected to have hit $9.0 billion in 2024, down from the $10 billion previously forecast, while net foreign portfolio investments (FPI) are seen to have improved to $6.3 billion from $4.2 billion.
The net FDI outlook for 2025, meanwhile, was slightly lowered to $10 billion from $10.5 billion while that for FPI was raised to $3.1 billion from $2.9 billion.
The financial account likely ended 2024 with a net inflow of $15.3 billion, the BSP said, up from the $10.5 billion projected in September, while the outlook for 2025 was raised to $15.6 billion from $8.7 billion.
Lower exports
As for the current account, the revised 2024 projection was said to be largely due to lower growth forecasts for both goods and services exports alongside higher services imports.
Merchandise exports, the BSP said, likely delivered a “more subdued performance” last year following a sharp third quarter slowdown as outbound semiconductor, copper and banana exports declined.
The updated outlook for services exports, meanwhile, was said to have taken into account a likely slowdown in revenues from business process outsourcing and travel activities “consistent with [the] latest trend driven in part by domestic constraints in AI (artificial intelligence) adoption and slow return of Chinese tourists into the country, among others.”
Merchandise exports were projected to have hit $56.5 billion in 2024, down from $57.6 billion previously, with growth slowing to 2.0 percent from 4.0 percent. The 2025 estimates were also trimmed to $58.8 billion from $61.1 billion, with growth dropping at 4.0 percent from 6.0 percent.
The services exports estimate, meanwhile, was cut to $52.2 billion from $54.6 billion for 2024 and $57.4 billion from $60.0 billion for 2025, with growth slowing to 8.0 percent from 13.0 percent for last year and staying 10.0 percent this year.
Good imports are expected to remain at $123.7 billion and $129.9 billion in 2024 and in 2025, respectively, growing by 2.0 percent and 5.0 percent.
Services imports are estimated to have picked up to $35.2 billion instead of $33.5 billion in 2024 and are also seen higher this year at $38.1 billion from $35.5 billion. Growth is expected to hit 19.0 percent and 8.0 percent, respectively.
Softer demand, uncertainty
“Expectations of softer global demand amid tight monetary conditions, post-pandemic fiscal consolidation, as well as larger trade barriers and increased uncertainty from President-elect Trump’s announced policies also continue to weigh down the near-term prospects for goods exports,” the BSP said.
Outsourcing revenues were estimated to have hit a lower $31.2 billion in 2024 — the forecast was $31.4 billion in September — and are expected to hit $33.0 billion this year instead of $33.6 billion. Growth would be slower at 5.0 percent instead of 6.0 percent last year and 6.0 percent from 7.0 percent for 2025.
Travel receipts were also seen to have dropped to $10.5 billion last year, narrower than the $12.8 billion projected in September, and could hit $12.6 billion this year instead of $14 billion. Growth subsequently likely plunged to 15.0 percent in 2024 from 40 percent. For 2025, higher growth of 20 percent, instead of 10 percent, was projected.
The forecasts for cash remittances, meanwhile, were retained at $35.5 billion for 2024 and $35.5 billion for 2025.
Gross international reserves, lastly, were estimated to have closed 2024 at $109 billion instead of $106 billion and were seen improving to $110 billion this year from $107 billion previously.
Be the first to comment