February 4, 2023

Filipino Guardian

Sentinels of Filipino Free Press

BSP sees larger BoP deficit this year amid uncertain global outlook


THE BANGKO SENTRAL ng Pilipinas (BSP) expects the country to post a larger balance of payments (BoP) deficit this year as uncertainty remains clouded over the global outlook.

The central bank said the revised BoP forecasts for this year and 2023 were mainly influenced by the same risk factors considered in the September forecast round.

“In particular, risk factors such as persistently high inflation, the protracted Ukraine-Russia conflict and pandemic-related legacies continue to weigh on the external sector outlook in the near term,” BSP said.

“While the assumption for global GDP (gross domestic product) growth for 2022 has been left unchanged from the last projection, the downward revision of the growth assumptions for the United States and China, which are the country’s main trading and investment partners, reflects a weaker development in the Foreign demand in the future,” she added.

The country’s balance of payments is now expected to show a deficit of US$11.2 billion or -2.8% of GDP this year, larger than the previous forecast of US$8.4 billion ( -2% of GDP) announced in September.

The latest GNP data showed the country’s balance of payments deficit of $7.8 billion in the January-September period, larger than the $665 million gap in the same period last year.

Meanwhile, the current account deficit is expected to end the year with a deficit of $20.5 billion, equivalent to -5.1% of GDP, slightly lower than the $20.6 billion forecast in September ( -5% of GDP).

The current account deficit was $5.8 billion in the third quarter, wider than the $974 million gap a year earlier, amid a larger goods trade deficit.

“For 2022, the outlook for the external sector remains mainly constrained by elevated global inflation, which has prompted central banks to maintain aggressive monetary tightening policies, with a corresponding impact on growth and demand,” the BSP said.

“Against this backdrop, the key growth drivers that have supported the domestic recovery, expanded immunization coverage and a gradual full reopening of the economy, have also revived exports of high-value services previously hampered by the pandemic, such as B. Travel and travel-related activities as well as BPO (Business Process Outsourcing) services.”

For the current account components, GNP left its growth forecasts for goods imports and exports at 20% and 4% respectively.

Meanwhile, imports and exports of services are expected to increase by 18% and 16%, respectively, from 14% in September.

BSP maintained its 9% growth forecast for BPO revenue, while travel revenue is now expected to grow 400% from just 250% previously.

The central bank also maintained its 4% growth forecast for overseas cash remittances by Filipino workers. In the first nine months of 2022, cash remittances grew 3.1% year over year to $23.825 billion.

“As mobility conditions continue to improve and travel protocols are relaxed, outbound remittance inflows from Filipinos are also expected to remain resilient, supported by a strong recovery in outbound deployment,” the BSP said.

The current account deficit was $5.8 billion in the third quarter, wider than the $974 million gap a year earlier, amid a larger goods trade deficit.

As for the financial balance sheet, inflows are expected to be $8.2 billion, down from the previous forecast of $11.1 billion, as the central bank sees a downtrend in foreign direct and portfolio investment.

The central bank now expects foreign direct investment (FDI) to end the year with net inflows of $8.5 billion, down from September’s forecast of $10.5 billion.

Meanwhile, foreign portfolio investment (FPI) is expected to end 2022 with net inflows of $3.5 billion, down from the $4.5 billion forecast made in September.

“Both foreign direct investment and foreign portfolio investment are expected to lead to continued inflows, albeit at more modest levels than initially expected after investor sentiment was dampened by external headwinds,” the central bank said.

Finally, the country is now expected to end the year with gross international reserves (GIR) of US$93 billion, equivalent to seven months of import coverage, below the previous forecast of US$99 billion (7.5 months). lies. The GIR was $93 billion at the end of November.


For 2023, the BoP is forecast to end at a larger deficit of US$5.4 billion, equivalent to -1.3% of GDP, versus the previous forecast of US$2.5 billion (-0.6 % of GDP).

“For 2023, the full BoP balance sheet is expected to show a larger deficit compared to the previous forecast on a weaker global growth outlook. Both advanced and emerging market economies are expected to feel the full impact of monetary tightening, particularly by the US Federal Reserve, in terms of lower borrowing activity and slower spending this year,” said The BSP.

“As the likelihood of the current tightening cycle continuing into 2023 remains high, risks to the growth outlook are broadly skewed to the downside. Domestic activity will continue to be a means of supporting the country’s foreign payment position,” she added.

The central bank said it expects a slightly smaller current account deficit of $19.9 billion (-4.7% of GDP) next year from $20.1 billion (-4.5% of GDP) previously on expectations that the gap in the country’s trade in goods is narrowing.

Growth forecasts for goods exports and imports remained unchanged at 3% and 4% respectively.

Services exports are now expected to grow 15% next year, up from 12% previously. Meanwhile, growth forecasts for services imports, BPO revenue and travel revenue were kept at 8%, 5% and 150%, respectively.

“Further easing of entry and mobility restrictions for foreigners could boost tourism and travel-related activities and BPO services,” the BSP said.

BSP also kept its cash remittance growth forecast for 2023 at 4%.

On the other hand, the financial account is now expected to see slightly lower inflows of $13.4 billion in 2023 from $16.5 billion previously.

FDI net inflows are now seen at $11 billion in 2023, down from the previous forecast of $12.5 billion, while FPI net inflows are expected to be $5 billion versus $6.7 billion US dollars before.

Finally, the central bank lowered its GIR forecast for 2023 to $93 billion from the September forecast of $100 billion.

“The government’s continued push for its infrastructure agenda and recently approved structural reforms also support expectations of sustained imports and foreign investment, albeit at a more modest pace given the expected decline in international oil prices and subdued investor sentiment. Currency buffers are also expected to boost investor confidence amid the current challenging global environment,” the central bank said.

“The BSP will continue to closely monitor emerging external sector developments and risks and how these may impact on the BSP’s ability to meet its price and financial stability objectives,” she added. — KB Ta-asan