September 23, 2024 | 12:00am
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) anticipates further improvement in the country’s external payments position this year, attributing it to stronger inflows that will result in a higher balance of payments (BOP) surplus.
In a statement, the central bank said the Philippines is expected to post a higher BOP surplus of $2.3 billion or 0.5 percent of gross domestic product, from the previous forecast of $1.6 billion or 0.3 percent of GDP a quarter ago.
For 2025, the BSP raised its BOP surplus projection to $1.7 billion or 0.3 percent of GDP as of the third quarter from $1.5 billion or 0.3 percent of GDP as of the second quarter.
“The latest set of forecasts indicates an improvement in the overall BOP position for 2024 and 2025 relative to the June 2024 projection exercise,” the BSP said.
“This development is underpinned mainly by the sustained positive global and domestic economic growth prospects, decelerating inflation as well as the pickup in world trade activity.”
The BOP is the difference in total values between payments into and out of the country over a period.
A surplus indicates that more dollars flowed into the country from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing (BPO) earnings and tourism receipts than what flowed out to pay for the importation of goods, services and capital.
According to the central bank, the BOP position is projected to post a higher surplus in 2024 and 2025 based on the significant rise in non-resident inflows observed in the first half of the year.
Latest data showed that the country’s BOP surplus stood at $1.4 billion from January to June, 39.1 percent lower than the $2.3 billion surplus recorded in the same period last year.
On the other hand, the BSP expects the country’s current account (CA) shortfall to widen to $6.8 billion or -1.5 percent of GDP from the $4.7 billion or -1 percent of GDP that was previously forecast.
For next year, the CA gap is also seen to widen to $5.5 billion or -1.1 percent of GDP from $2 billion or -0.4 of GDP a quarter ago.
The wider CA deficit in 2024 was due to the lower growth forecasts for goods and services export, the BSP said.
Monetary authorities expect goods exports to grow by four percent as of the third quarter (from five percent as of the second quarter) and goods imports to rise by two percent this year.
Likewise, the central bank sees services exports jumping by 13 percent (from 14 percent) and services imports growing by 13 percent this year.
“Merchandise exports are seen to deliver a more subdued performance as the local semiconductor industry, with its heavy reliance on legacy products and downstream assembly, does not appear to be benefitting from the AI-induced upturn in global electronics demand,” the BSP said.
The BSP expects travel receipts to grow by 40 percent this year while the projected increase in BPO revenues has been revised to a slower pace of six percent from the initial estimate of seven percent.
The BSP also sees a higher hot money net inflow of $4.2 billion instead of the previously projected $3.1 billion this year. Meanwhile, the target for foreign direct investment inflow was raised to $10 billion from $9.5 billion.
“Given prospects of continued foreign exchange inflows into the economy, there is scope to expect further buildup in the gross international reserves (GIR) for 2024 to 2025,” the central bank said.
The BSP projects the country’s GIR to hit $106 billion this year and $107 billion next year, higher than the previous forecasts of $104 billion and $105 billion, respectively.
“Nonetheless, while there are reasons for optimism on the BOP outlook for next year, the assessment remains subject to downside risks from potential market instability from escalations in geopolitical and geoeconomic risks including the brewing conflict in the Middle East and US-China trade tensions,” the BSP said.
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