Higher BOP surplus projected this year

MANILA, Philippines — More US dollars are seen flowing into the country, with the Bangko Sentral ng Pilipinas (BSP) now projecting a balance of payments (BOP) surplus of $3.7 billion this year, reversing the $2.3 billion deficit recorded last year.

Dennis Lapid, director of the BSP’s Department of Economic Research (DER), said the projected surplus this year is equivalent to one percent of gross domestic product (GDP) compared to the deficit equivalent to -0.7 percent of GDP last year.

The projected surplus this year is also a complete reversal of the projected BOP deficit of $3.5 billion as of November last year.

Lapid said key considerations in the revision include the downward revision in the global economic growth outlook by the International Monetary Fund (IMF) to 3.3 percent instead of 3.5 percent this year.

Lapid also cited the near term moderation in global trade outlook due to the trade war between the US and China, the uncertainties over “Brexit,” as well as the expected decline in commodity prices.

Furthermore, Lapid cited the shift to a dovish monetary policy stance by the US Federal Reserve and the expected modest rebound in capital flows to emerging markets including the Philippines.

Lapid said the BSP also considered the sustained favorable domestic growth prospects of the Philippines despite the easing of the GDP growth to a four-year low of 5.6 percent in the first quarter from 6.3 percent in the fourth quarter.

The BOP is the difference in total values between payments into and out of the country over a period.

A surplus means more foreign exchange flowed into the country from exports, remittances from overseas Filipinos, business process outsourcing earnings and tourism receipts than what flowed out to pay for the importation of more goods, services, and capital.

Lapid said the BSP, on the other hand, expects exports to book a slower growth of two percent instead of six percent this year, while imports would also record a slower increase of seven percent instead of nine percent.

Likewise, the business process outsourcing (BPO) sector is seen posting a lower increase in earnings of five percent instead of eight percent this year, while the tourism industry is seen recording a slower increase in earnings of nine percent instead of 13 percent.

Remittances from overseas Filipinos would likely book a three percent increase this year.

BSP Department of Economic Statistics director Redentor Paolo Alegre said the Philippines booked a BOP surplus of $3.8 billion in the first quarter of the year, reversing the $1.2 billion deficit recorded in the same quarter last year.

 “This developed as a result of the higher net inflows in the financial account, mainly on account of the reversal of portfolio investments to net inflows, as well as the increased net inflows in the other investment and direct investment accounts during the quarter,” Alegre said.

Alegre added the strong performance of the financial account during the quarter was bolstered by favorable investor sentiment attributed to the country’s solid macroeconomic fundamentals and firm economic growth prospects.

As a result of these developments, the country’s gross international reserves (GIR) amounted to $83.6 billion as of end-March, higher than the $80.5 billion level registered in end-March last year and could sufficiently cover 7.3 months’ worth of imports of goods.