Further improvement in Phl external position seen

The Bangko Sentral ng Pilipinas (BSP) sees a further improvement in the country’s external payments position this year due to a likely higher balance of payments (BOP) surplus and a narrower current account (CA) deficit.

In a virtual briefing, Sittie Hannisha Butocan, director at the BSP’s Department of Economic Research, said the central bank raised its BOP projection this year, forecasting a surplus of $700 million or 0.1 percent of gross domestic product from $400 million or 0.1 percent of GDP.

However, the projected BOP surplus this year will be significantly lower than the $3.7 billion excess in 2023, which was equivalent to 0.8 percent of GDP.

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

A surplus indicates that more dollars flowed into the country from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing (BPO) earnings and tourism receipts than what flowed out to pay for the importation of goods, services and capital.

“The overall BOP position in 2024 is projected to settle at a slightly higher surplus relative to the previous forecast, on the back of the estimated narrower current account gap for the year and modest inflows of non-resident investments,” Butocan said.

The BSP now expects the country’s CA shortfall to narrow to $6.1 billion or 1.3 percent of GDP from $11.2 billion or 2.6 percent last year. This is also slimmer than the $9.5 billion gap or two percent of GDP projected previously.

According to Butocan, monetary authorities revised their growth projections for both goods exports and imports compared to the previous forecast round, factoring in insights by export industry associations.

The BSP sees goods exports and imports to grow by three percent and four percent this year, respectively. This is slower than the five-percent and sevenpercent growth projections the central bank gave in December.

Meanwhile, the BSP still sees services exports jumping by 16 percent and services imports rising by 10 percent this year.

“The lower CA deficit likewise considers waning pent-up demand and lingering upside risks to domestic inflation alongside the impact of monetary tightening, which could dampen overall economic activity over the near term,” Butocan said.

The BSP expects travel receipts to grow by 50 percent while BPO revenues could increase by seven percent this year. The central bank is also targeting a threepercent expansion in cash remittances from OFWs this year.

The BSP also expects a lower hot money net inflow of $1.3 billion instead of the previously projected $1.7 billion. The target for foreign direct investment inflow stood at $9 billion, lower than the $10 billion the central bank gave in December.

For 2025, Butocan said the BOP may reverse to a deficit of $500 million or 0.1 percent of GDP, while the CA shortfall could further improve to $5.8 billion or 1.1 percent of GDP.