BoP projections under review
THE CENTRAL BANK will be revising its forecasts for the country’s balance of payments (BoP) position for 2017, taking into account the latest developments in the global economy that are expected to lift the country’s prospects, a senior official said.
BSP Deputy Governor Diwa C. Guinigundo said monetary authorities are updating their assumptions and forecasts on the Philippines’ external position, in light of recent events surrounding global growth and possible policy shifts in the United States, the world’s biggest economy.
“We need to recast our forecasts,” Mr. Guinigundo said in a press briefing on Friday when asked for his BoP outlook.
The BoP measures the country’s transactions with the rest of the world during a specific period. A surplus shows that more funds entered an economy against what went out, while a deficit meant more money fled than what came in.
As of December, the Monetary Board expects the country’s BoP to log a $ 1- billion surplus this year, equivalent to 0.3% of gross domestic product (GDP).
The current account, which measures money flows from goods and services, is expected to make up the bulk of the sum at $800 million, or 0.2% of GDP. Imports are projected to grow by a tenth, while a two percent climb is seen for exports of goods.
Last year’s actual performance fell far short of the BSP’s expectations. The BoP settled at a $420-million deficit in 2016 against a forecast of a $500-million surplus, while the current account narrowed sharply to $601 million from a $2.5-billion estimate.
The BSP attributed the decline to a wider trade deficit, as a 16.6% climb in imports outpaced a modest recovery in exports last year, coupled with a “challenging” global environment particularly during the fourth quarter.
Mr. Guinigundo cited improving global conditions as among the reasons for revising this year’s forecasts, with the International Monetary Fund seeing a 3.4% growth in world output from 3.1% in 2016.
Money inflows tallied in January likewise pointed to more upbeat prospects for the Philippines, the central bank official added.
“I think the January numbers — of both exports, which grew by more than 22%, and remittances, which showed an increase of eight percent versus our forecast of four percent for the entire year of 2017 — those are good signs that the robustness of those two accounts will continue together with good prospects in the global economy,” Mr. Guinigundo said.
Outbound shipments of goods surged 22.5% to $5.13 billion in January, recovering from a 3.9% decline a year ago, based on preliminary data from the Philippine Statistics Authority.
Meanwhile, the BSP reported an 8.6% jump in remittances from overseas Filipino workers ( OFWs) to $ 2.169 billion in January, marking the 12th straight month when inflows breached $2 billion. Rising world crude prices are also seen to provide a lift to remittances from OFWs, as these will ensure “steady demand” for workers in the oil- rich Middle East, Mr. Guinigundo said.
However, some uncertainty may hound business process outsourcing (BPO) as US President Donald J. Trump has talked of prohibiting American companies from hiring abroad. “With respect to the BPOs, [ it’s] still an iffy situation considering the uncertainty in the policy of the new US administration with regard to the business regulation of BPOs. But based on anecdotal evidence, they continue to come,” Mr. Guinigundo added.
This also comes at a time that the US Federal Reserve is pursuing a series of rate hikes, starting with a 25- basis- point increase announced last week and two more on the table later this year.
The BSP usually revises its BoP forecasts twice a year: the first in June, and the second by December.