BSP Governor Rafael Buenventura said the central bank expects a $200-million surplus this year, a marked improvement from the most recent projection of a $100-million deficit this year.
Originally, the BSP had calculated that the country would be incurring a huge BOP deficit of $1 billion as the economy skidded to a near-halt in the wake of the slump in electronics exports.
However, the central bank later upgraded its estimates and said the steady recovery of the global economy, specifically the US, would improve the country’s position enough to almost eliminate the BOP deficit.
The BOP account represents the country’s total transactions with the rest of the world, both in goods and services and in capital flows.
A negative BOP position would translate to a drain on BSP’s dollar reserves, and a sustained deficit eventually leads to a weaker peso versus the US dollar.
On the other hand, a surplus or even a lower BOP deficit would mean higher dollar reserves that would be critical in defending the local currency against attacks by currency speculators.
Thus, Buenaventura said, the reversal projected for 2002 will result in a stronger peso versus the US dollar, and this is expected to subsequently translate to more stable consumer prices and lower inflation.
The BSP chief said he expects the BOP to improve dramatically when the local economy recovers along with the anticipated recovery of its global trading partners, especially the US. – Des Ferriols