BSP sees improvement in BOP outlook this year

THE country’s Balance of Payments (BOP) could settle at a “higher surplus” compared to initial projections, according to the Bangko Sentral ng Pilipinas (BSP).

Based on the latest outlook of the BSP, the BOP is expected to average 0.1 percent of the country’s GDP in 2024.

However, the expected increase in infrastructure investments could reverse the country’s BOP position in 2025 at a contraction of 0.1 percent of GDP.

“The BSP continues to emphasize limitations to the forecasts, particularly given the continued buildup of external challenges. The BSP will continue to monitor closely emerging external sector developments and risks and how these may impact the BSP’S fulfillment of its price and financial stability objectives,” the BSP said.

The improvement in the BSP’S BOP outlook for 2024 was mainly due to expectations that growth forecasts for the United States, China, and the Asean.

The improvement in the growth outlook for these countries could bode well for the country’s external trade performance.

Further, travel and tourism are still expected to improve to pre-pandemic levels given these better growth forecasts. BSP said this would improve the country’s services sector.

“These upward adjustments are mainly reflective of the stronger-than-expected growth outcome of these economies in 2023, as well as the role of fiscal policy support in the case of China,” BSP said.

However, world trade is still expected to be below its historical average. BSP said there is a potential increase in supply-side pressures due to weather and geopolitical shocks.

These shocks, BSP said, need to be closely monitored such as the conflict in Gaza and the attacks in the Red Sea. If these are left unresolved, the central bank said it could negatively impact external demand.

BSP said for 2025, the country’s overall BOP position will reverse to a deficit due to a wider tradein-goods gap as well a reduction in the projected financial account inflows.

“The larger shortfall in goods trade is primarily due to the faster increase in goods imports mainly on account of the strong growth in public infrastructure investments,” BSP said.

BOP in 2023

THE BSP said full year 2023 BOP position posted a surplus of $3.7 billion, a turnaround from the $7.3 billion deficit recorded in 2022.

With this, the country’s gross international reserves (GIR) amounted to $103.8 billion as of end-december 2023, higher than the $96.1 billion level registered as of end-december 2022.

“The BOP surplus was driven by the contraction of the current account deficit along with the expansion of the financial account net inflows,” BSP said.

In the fourth quarter, the country’s BOP position registered a surplus of $1.9 billion in the fourth quarter of 2023. This was more than three times the $568-million surplus recorded in the fourth quarter of 2022.

“The higher BOP surplus was supported by a significant increase in net inflows in the financial account. Meanwhile, the current account registered a higher deficit in the fourth quarter of 2023,” BSP said.

The data showed the country’s current account (CA) recorded a deficit of $11.2 billion in 2023, lower by 38.6 percent than the $18.3 billion deficit in 2022.

The BSP said the lower CA was due to a narrower trade in goods deficit. There was an increase in trade in services and secondary income accounts.

The data showed that the estimated 91.5 percent of the drop in the imports value and 92.6 percent of the decrease in exports value were due to price changes.