The Bangko Sentral ng Pilipinas revised its balance of payments (BOP) projects and instead forecasted higher surpluses for 2024 and 2025. The BOP is a summary of a country's economic transactions with the rest of the world for a specific period.
BSP Department of Economic Research Director Sittie Hannisha Butocan said the Monetary Board met recently and projected the BOP surplus to reach $1.6 billion this year, up from the earlier forecast of $700 million.
"This is because of a lower current account deficit and higher non-resident investment inflows. The lower current account gap is anchored on the narrowing of the merchandise trade deficit as growth in goods imports is estimated to moderate to 2% due partly to the continued easing of international commodity prices," she said.
Butocan said goods export growth had been upgraded to 5% from the earlier 3% due to the better-than-expected outturn in the first quarter of this year on the back of the robust recovery in global electronics demand.
"Further supporting the current account is the sustained expansion of travel receipts at 40%, although lower than the previous forecast of 50 percent due largely to base effects," she said.
Travel exports are also projected to surpass their pre-pandemic level of about $10 billion, reaching $12 billion to $13 billion this year. The BSP also expects foreign direct investments (FDI) and foreign portfolio investments (FPI) to yield higher net inflows of $9.5 billion and $3.1 billion, respectively, for 2024.
"The United States, a key FDI source for the Philippines, is expected to post notable growth in 2024. Meanwhile, FPI should be bolstered by the expected doubling of planned equity issuances this year relative to last year," Butocan said.
For 2025, the overall BOP position is projected to reverse into a surplus.
Butocan noted that the BOP is expected to post a surplus of $1.5 billion, a turnaround from the earlier $500 million deficit projection.
"This assessment is based on a further improvement in the current account balance, as well as relatively higher financial account flows," she said.
The narrower current account gap was due to the sustained growth of goods exports at 6% combined with a lower growth forecast for imports at 5%.
Travel receipts will likely expand by 10% in 2025 as tourism activity returns to a standard growth path, while Business Process Outsourcing (BPO) growth was estimated at 7% as the country continues to be an attractive IT-BPO destination.
Overseas Filipino remittances are projected to grow by 3%. Non-resident investment flows, meanwhile, are expected to sustain gains, albeit modest, with investors anticipated to act with caution amid possible policy shifts as new political leaders in more than 50 economies are seated by next year.
"The latest BOP forecasts generally reflect an improvement from previous projections given recent upside surprises. Nonetheless, the emerging external outlook continues to take on a cautiously optimistic view given lingering uncertainties, particularly relating to geopolitical tensions and weather-related shocks, which could ignite a fresh set of challenges, such as higher fuel prices and weaker market sentiment," Butocan said.
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