By means of Luisa Maria Jacinta C. Jocson, Reporter
THE BANGKO SENTRAL ng Pilipinas (BSP) expects the country’s balance of payments position to post a wider surplus this year, but also expects broader current account deflation.FIT
In a statement late on Friday, the central bank said it has raised its BoP forecasts amid “continued positive global and domestic economic growth prospects, which are slowing over time.”Fand the revival of global trade activity.”
The BSP’s latest projections show that the BoP will post a surplus of $2.3 billion this year, equivalent to 0.5% of gross domestic product (GDP). This is higher than the previous projection of $1.6 billion (0.3% of GDP).
The BoP offers a glimpse into the country’s dealings with the rest of the world. A surplus indicates that more money has entered the economy, while a deFicit indicates that there is more money left.
“Based on the foregoing and reality Ffigures included in the FIn the first half of 2024, the overall BoP position is expected to show a higher surplus compared to the previous round of projections for this year and the next,” the central bank said.
The latest BSP data shows that the country’s BoP level stood at a surplus of $1.6 billion in the January-August period, lower than the surplus of $2.1 billion a year ago.
“Meanwhile, the Philippine economy is seen to maintain its growth momentum, supported by resilient domestic demand, at lower levelsFthe process and the timely adoption of the national budget,” the BSP said.
It also noted that the improved BoP outlook comes from the continued eFforts to improve the business environment by ramping up infrastructure development and implementing reforms to boost investment.
The Philippine economy grew 6.3% in the second quarter, the fastest since 6.4% in the first quarter of 2023.
During the first half of the year, GDP averaged 6%. The government is targeting growth of 6 to 7% this year.
Meanwhile, the BSP said emerging risks to the BoP outlook “remain broadly balanced.”
“On the other hand, commodity price volatility due to geopolitical and extreme weather events, trade tensions and possible mobility risks from the emergence/re-emergence of highly contagious diseases (e.g. MPox) are weighing on the prospects for the country’s external sector. it said.
For next year, the BSP expects the BoP surplus to reach $1.7 billion, equivalent to 0.3% of GDP.
“For 2025, the overall BoP position is likely to be at a higher surplus than in the previous projection, with netFFinancial account lows continue to be a significant contributor, alongside a narrowing current account gap.”
The BoP outlook for next year is driven by expectations of continued global demand and trade activity, the BSP said.
“While there are reasons for optimism about the BoP outlook for next year, the assessment remains subject to downside risks from potential market instability and from escalations in geopolitical and geo-economic risks, including the looming conflict in the Middle East and the trade tensions between the US and China.”
CURRENT ACCOUNT DEFICIT
Meanwhile, the central bank is now projecting the current account theFThe goal is to reach $6.8 billion, which equates to -1.5% of GDP.
This is wider than the previous forecast of $4.7 billion (-1% of GDP). The current account includes transactions involving goods, services and income.
For 2025, the BSP expects the current account to increaseFI expect the economy to reach $5.5 billion (-1.1% of GDP), also higher than the $2 billion (-0.4% of GDP) previously.
In the Ffirst half, the current account theFicit amounted to US$7.1 billion, accounting for 3.2% of GDP.
“The broader current account theFThe 2024 crisis was due to the reduction in growth forecasts for exports of goods and services,” the BSP said.
The country cut its goods export forecast for 2024 from 5% to 4%, but maintained its forecast of 6% for next year.
The central bank said goods exports are expected to show “moderate performance.”
“The local semiconductor industry, with its heavy dependence on legacy products and downstream assembly, does not appear to benefit from the AI-induced revival in global electronics demand,” the BSP said.
“The expected weakness in semiconductors is partially offset by exports of other electronic products (e.g. electronic data processing, consumer electronics, telecommunications, medical/industrial instruments and automotive electronics), which are expected to be driven by the technology replacement cycle and overall recovery from global demand.”
The central bank maintained its growth forecasts for goods imports at 2% this year and 5% for 2025.
Meanwhile, the BSP expects services exports to grow 13% this year, slightly lower than the previous projection of 14%. The country maintained its service export forecast at 10% for 2025.
The central bank also maintained its forecasts for service imports at 13% this year and 6% next year.
“Services export growth is also likely to be modest following the weaker-than-expected performance of the BPO sector due to lower revenues from other business services, especially contact centers,” the report said.
“Nonetheless, the current account outlook continues to be supported by robust travel revenue growth prospects, along with steady inflows of overseas Filipino [worker] (OFW) remittances.”
The growth forecast for BPO revenues was reduced from 7% to 6% this year. It maintained its BPO sales growth projection of 7% for next year.
Meanwhile, the central bank also maintained its forecasts for remittances at 3% this year and next.
During the first seven months, remittances from OFWs rose 2.9% to $19.332 billion from $18.785 billion a year ago.
As for the financial bill, it is expected to come outFlows could reach $10.5 billion this year, higher than the previous estimate of $7.7 billionFlows.
The FThe financial account records transactions between residents and non-residents Ffinancial assets and liabilities.
Financial account outflows in the US amounted to $10.5 billion Ffirst semester was evident from the latest data from the BSP.
“The higher net inFlow in the FThe financial bill was largely driven by the notable increase in portfolio investments, which in turn was driven by stronger global and domestic growth prospects, which will also benefit from indications of a shift in the monetary policy stance towards easing by the US Fed,” the BSP said. said.
“These factors should continue to support higher levels of both foreign direct investment (FDI) and foreign portfolio investment (FPI) for the remainder of the year,” it added.
The BSP also increased its forecast for net foreign direct investmentFlow of $9.5 billion this year to $10 billion this year.
The latest data from the central bank shows that net foreign direct investment inflows rose 7.9% year-on-year to $4.4 billion in the United States. Ffirst half of the year.
The central bank also raised its FPI projection of net inflows for this year from $3.1 billion to $4.2 billion. Short-term foreign investments produced net gainsFlow of $1.46 billion in the Fin the first seven months, and increased by 830.7% from a year ago.
Gross International Reserves (GIR) are expected to reach $106 billion this year, higher than the previous forecast of $104 billion.
Dollar reserves rose 7.39% year-on-year to $106.92 billion at the end of August.
“Given the prospects for continued foreign exchange earningsFlows in the economy, there is room to expect further build-up in the GIR for 2024-2025,” the BSP added.