The Bangko Sentral ng Pilipinas on Friday revised its balance of payments forecast in 2023 to a deficit of $1.2 billion from a previous estimate of $1.6-billion shortfall over the narrowing trade deficit.
“For 2023, the overall BOP position is seen to register a lower deficit relative to the March 2023 projection exercise. This development is underpinned largely by a narrower merchandise trade gap, as goods imports growth is expected to slow down sharply following the pullback in international prices of major commodities, particularly fuel. This is accompanied by a sustained fall in goods exports as global demand weakens further,” it said in a statement.
The Philippines incurred a BOP deficit of $7.3 billion in 2022, a turnaround from the $1.3-billion surplus in 2021.
The BSP said despite the optimism attached to the reopening of China’s economy, such a view remained tentative given its numerous domestic challenges, including declining property sales and real estate investment.
“Nonetheless, prospects for business process outsourcing and tourism industries remain positive, alongside stable remittance inflows from overseas Filipinos, providing support to the current account,” it said.
Latest Philippine Statistics Authority data showed that the trade-in-goods deficit, or the difference between the value of exports and imports, reached $4.53 billion in April, down from $5.32 billion a year ago. It was also lower than the $5.1-billion deficit in March.
The BSP said it also expects a lower BOP deficit of $500 million in 2024.
“For 2024, the overall BOP position is projected to post a slightly lower deficit relative to the previous forecast. This is hinged mainly on the foreseen normalization and return to pre-pandemic levels of global and domestic economic activity,” the BSP said.
The International Monetary Fund expects global economic activity and trade to rise by 3.0 percent and 3.5 percent in 2024, respectively, both higher than their 2023 forecasted growth rates.
The BSP said these developments bode well for the country’s trade and investments prospects for next year, with the downturn in the global semiconductor market predicted to bottom out by the middle of 2023 and into 2024.
The Monetary Board earlier approved the new set of 2023 and 2024 balance of payments projections during its June 15 meeting that incorporated the latest available data and recent emerging developments.
The forecast for cash remittances for 2023 and 2024 was retained at 3 percent on sustained demand for overseas Filipino workers abroad as they fill in for the labor shortage resulting from pandemic-induced job losses and aging populations in host economies.
The forecast for net foreign direct investments was lowered to $9 billion from $11 billion for 2023, and to $11 billion from $12 billion for 2024 in line with the slowdown in non-residents investments globally.
“This is attributed to the observed geo-economic fragmentation of FDIs and slowdown in the globalization process triggered primarily by rising geopolitical tensions between major economies,” the BSP said.
It also retained the forecast for registered foreign portfolio investments or hot money at $2.5 billion and $3.5 billion for 2023 and 2024, respectively.
The BSP maintained the forecast for gross international reserves at $100 billion this year and $102 billion in 2024.
Data showed that the GIR increased to $101.8 billion as of end-April from $101.5 billion as of end-March. The latest GIR level represented a more than adequate external liquidity buffer equivalent to 7.6 months’ worth of imports of goods and payments of services and primary income.