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$3.7-B BoP surplus forecast this year

June 15, 2019

THE Bangko Sentral ng Pilipinas (BSP) sees a positive balance of payments (BoP) this year as sustained investment inflows are likely to offset the expected current-account deficit.

In a briefing on Friday, monterary officials announced that overall BoP could revert to a surplus of $3.7 billion this year, reversing 2018’s $2.306-billion deficit.

The new overall BoP forecast was also a reversal of the previously projected $3.5-billion deficit, and equivalent to 1.0 percent of gross domestic product (GDP).

The current account — a major component of BoP — is expected to hit a $10.1-billion deficit this year, equivalent to 2.8 percent of GDP and higher than the previous estimate of $8.4 billion.

“That’s mainly on account of weaker export growth — the projection now is 2-percent overall growth for 2019 versus 6 percent back in November. That’s largey tied to expectations of weaker external demand for our products,” BSP Department of Economic Research Director Dennis Lapid explained.

Imports growth, on the other hand, was expected to moderate to 7 percent from the earlier forecast of 9 percent.

“The sources of financing for the current account are still largely intact, but we are taking into account the weaker overall prospects for global economic activity,” Lapid said.

Offsetting the wider current account shortfall is the increased inflows in the financial account, which was projected to reach $12.3 billion this year.

Financial account’s major components — foreign direct investments (FDI) and foreign portfolio investments (FPI) — are seen to post a net inflow of about $9 billion and $4 billion, respectively.

“In short, there’s a slightly wider current-account deficit, but an improvement in the financial account, largely because of the recovery in portfolio flows into the country,” Lapid explained.

According to the Bangko Sentral official, other key developments considered in the latest BoP projection include the downward revision in global economic growth outlook; near-term moderation in the global trade outlook; expected decline in commodity prices; possible racheting up of trade tensions; US Federal Reserve’s shift to a “dovish” monetary policy stance; uncertainties over Brexit developments; expected modest rebound in nonresident capital flows to emerging markets; and sustained favorable domestic-growth prospects.

‘Financiability’ of CA deficit

For his part, BSP Deputy Governor Diwa Guinigundo said the latest BoP projections “captures the implications of a growing economy like the Philippines” and shows the financiability of current-account deficit.

“We will continue to grow. We will continue to incure merchandise trade deficit and, therefore, the current account will continue to be in [a] shortfall position, but the inflows of [FPI and FDI], and even in terms of other investments, [are making us see] the financiability of the current-account deficit,” he said.

Meanwhile, BSP Department of Economic Statistics Director Redentor Paolo Alegre Jr. said the current account incurred a deficit of $1.216 billion in the first quarter, wider than the $335-million recorded a year earlier.

“The current account remained in deficit, owing primarily to the trade-in-goods deficit, which more than offset the net receipts recorded in trade-in-services, primary and secondary income accounts,” Alegre explained.

The trade-in-goods account posted a higher deficit of $12.4 billion, while net receipts of trade-in-services increased by 11.8 percent to $3.2 billion in the first three months of 2019.

Despite the expansion of the current account during the period, the BoP balance was earlier reported to have reverted to a surplus of $3.797 billion from the $1.227-billion deficit the year before.


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