The Philippines may incur a lower balance of payments (BoP) surplus this year, according to the Bangko Sentral ng Pilipinas (BSP).
Data shared by central bank Governor Benjamin Diokno showed on Thursday that the BSP now anticipates a $6.2-billion BoP surplus this year, equivalent to 1.6 percent of the country’s gross domestic product (GDP).
The latest forecast compares to the $16 billion payments balance surplus recorded in 2020.
The current account — a major component of BoP — is estimated to post a $9.1-billion surplus this year, equivalent to 2.3 percent of GDP. This was smaller than the actual $13-billion current account surplus last year.
Exports of goods are projected to pick up by 8 percent, a reversal from the 11.3 percent slide in 2020. Services exports are also seen to soar by 6 percent, a turnaround from the 23.9 percent contraction last year.
Cash remittances from overseas Filipino workers, meanwhile, are anticipated to climb by 4 percent, an about-face from the 0.8-percent decline in 2020.
On the other hand, the financial account is projected to post a net inflow of $4 billion, a reversal of the $5.8 billion net outflows last year.
Foreign direct investments (FDI) net inflows are seen expand to $7.8 billion from the $6.5 billion in 2020. The net foreign portfolio investments are anticipated to increase to $5.7 billion from $5.3 billion last year.
This year’s gross international reserves could hit another record-high of $114 billion, the data also indicated.
External position seen remaining strong
In a related development, a Fitch Group unit said the Philippines’ external position will remain strong this year on account of the current account surplus.
“We at Fitch Solutions forecast the Philippines’ current account to remain in surplus in 2021, coming in at a forecast 1.9 percent of GDP (from a prior forecast of 0.9 percent), up from an expected 4.4 percent (revised from 3.5 percent) in 2020,” Fitch Solutions noted in a report released on Thursday.
The current account consists of transactions in goods, services, primary income and secondary income. It measures the net transfer of real resources between the domestic economy and the rest of the world.
Fitch Solutions also do not see the current account balance to return into a deficit until 2022 despite a rebound in import demand this year.
“The rebound is largely contingent on the economy being able to reopen and infrastructure spending to go as planned by the 2021 budget,” it said
With this, the Fitch unit projected imports of goods and services to pick up by 15.8 percent this year, from an expected slide of 26.4 percent in 2020. In contrast, delays to the recovery in tourism and agricultural exports will limit exports expansion at 7.8 percent.
“The continued current account surplus will support an improvement in the Philippines’ external position,” it added.
Fitch Solutions said continued posting of current account surpluses will add to the country’s external assets and reduces risks that it could face any short-term external financing issues over the medium term.
“That said, over the longer term, we do see challenges for the Philippines external position which will likely drag the current account into a widening deficit,” it pointed out.