BSP sees higher BOP gap of $1.5 B this year

The Bangko Sentral ng Pilipinas (BSP) forecasts a higher balance of payments (BOP) deficit of $1.5 billion for 2018 after its previous estimate of $1 billion was surpassed in March partly due to a bigger merchandise trade deficit and increased imports.

During its presentation of quarterly BOP report late Thursday, it announced the revised external accounts projections as its current account forecast – a main component of the BOP – is now expected to hit $3.1 billion deficit this year from an earlier estimate of only $700 million (December 2017 forecasts).

The BSP said the updated projections “incorporate the latest available data and reflect recent and prospective economic developments, both domestic and global.”

“The overall BOP position for 2018 is seen to post a higher deficit of $1.5 billion from the earlier projection of $1.0 billion. This is equivalent to just -0.4 percent of gross domestic product, a very manageable external payments position,” according to the BSP.

The country’s gross international reserves (GIR) is still seen to close the year at $80 billion.

The GIR “remains ample” and could cover more than seven months’ worth of imports of goods and payments of services and income.

The new current account deficit projection, in the meantime, is equivalent to 0.9 percent of GDP and “mainly reflects the projected wider trade deficit as growth in goods imports largely outpaces exports growth,” explained the BSP.

The central bank expects shipment of imported goods will grow “robustly” by 11 percent this year, higher than earlier estimate of 10 percent. Exports are expected to recover this year with a 10 percent growth, up from nine percent in 2017.

“Goods imports are buoyed by the moderate increase in commodity prices, continued growth in imports of raw materials and manufactured goods, capital goods and consumer goods, in line with sustained strong domestic demand,” said the BSP. “This reflects the firm recovery in both advanced and emerging market economies.”

For the first four months of the the year, the BOP gap stood at $1.497 billion while GIR is at a level below $80 billion or $79.60 billion. The current account deficit as of end-March was at $208 million.

Last year, the BSP recorded a BOP deficit of $863 million, higher than 2016’s $420 million.