BOP could still manage a small surplus – BSP

If imports stay within forecast, and fund inflows improve in the last six months of the year, there is a good chance the country’s balance of payments (BOP) will manage a small surplus position for 2017, according to Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo.

The BSP on Friday announced that instead of a $1-billion BOP surplus this year that they originally estimated in December, they now see a deficit of $500 million in anticipation of the impact of external factors such as uneven global growth, higher US interest rates, and the Trump government’s trade policies which could undermine export growth.

“If exports continue to improve the way they have surged from January to April, 2017 at 12.4 percent versus our forecast of five percent, and imports continue to grow but at a rate slower than our forecast of 10 percent, there’s a good chance the current account will revert to even a small surplus,” Guinitions. gundo said over the weekend.

“Morever, if portfolio investments start to reverse to a surplus in June or July through the end of 2017, there is indeed a great likelihood the BOP will record a good surplus position,” he added.

Fund outflows resulted in BOP deficit in 2015 of $2.6 billion, ending nine years straight of surplus posi- The increase in the imports bill also resulted in a $420 million BOP deficit at the end of 2016.

For 2017, the BSP expects net foreign direct investments to hit $8 billion while hot money or portfolio fund inflows will likely reach $900 million.

But hot money inflows as of end-May reversed to a net ouflow of $544 million from a net inflow of $178 million the same period in 2016. The BSP attributed the fund outflows from investor uncertainties arising from global terrorist attacks and normalization of US interest rates.

Last Friday, the BSP also revised its current account surplus estimate to a deficit of $600 million this year, the first time it would be in deficit in 15 years. It earlier expected $800-million current account surplus.

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 includes 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 posted a deficit of $318 million versus a surplus position the same period last year of $730 million.