BSP sees $500-M BOP deficit this year

The Bangko Sentral ng Pilipinas (BSP) expects a balance of payments (BOP) deficit of $500 million this year, reversing its earlier projection of $1 billion BOP surplus, as imports rise and a higher US rates are absorbed.

The BSP also announced Friday that it has revised its current account balance estimate of $800 million surplus for 2017 to a deficit of $600 million, capping more than a decade of surplus current account positions in a row.

The central bank likewise slashed its gross international reserves forecast of $84.7 billion for this year to $80.5 billion. Other BOP-sensitive data includes remittances which the BSP still thinks will grow by four percent this year. Net foreign direct investments and portfolio fund investments are projected at $8 billion from $7 billion previously, and $900 million, respectively.

Fund outflows resulted to the BOP reporting a deficit in 2015 of $2.6 billion, ending nine years straight of surplus

positions.

The increase in the imports bill also resulted to a $420-million BOP deficit at the end of 2016.

The current account, as well as financial and capital accounts, are part of the BOP composition. The current account, which began its surplus run in 2002, includes trade-in-goods and services, income, and current transfers. The capital and financial account are direct, portfolio, and other investments.

As of end-April this year, the country’s BOP was in surplus of $917 million, the first month of surplus position following the deficit numbers of the first quarter.

For the first quarter, the current account reported a deficit of $318 million versus a surplus position the same period last year of $730 million.

The BOP is largely affected by fund flows such as investments and actual money transmissions, and these are impacted by the normalization of US interest rates as well as the financial market volatility.