BSP slashes BOP target

MANILA, Philippines - The Bangko Sentral ng Pilipinas has cut its forecast for the country’s balance of payments position this year due to uncertainties in the global financial markets.

BSP Governor Amando M. Tetangco Jr. said the country would likely end the year with a surplus of $1.1 billion, lower than the previous forecast of $3 billion.

“The revisions are essentially based on... the most recent economic outlook for the major trading partners of the Philippines, the bouts of volatility that we have seen in global financial markets, (and) countries’ macroeconomic fundamentals,” Tetangco explained.

“(This is also based on the) upbeat growth prospects of the Philippine economy, the latest data available on external transactions... and results from consultations with industry groups and other government agencies,” he said.

The BOP summarizes a country’s transactions with the rest of the world and include trade, foreign direct and portfolio investments, and even remittances from Filipinos abroad.

The current account component is expected to record a surplus of $6 billion this year, adjusted downward from $10.4 billion, as the country’s trade deficit is expected to widen due to higher imports.

Merchandise exports are still forecast to increase by six percent over year-ago levels, but imports are now seen growing by nine percent from an earlier estimate of a six-percent expansion.

Tetangco said the revised imports goal is due to rising demand from domestic companies and the requirements for the rebuilding efforts following typhoons that devastated the country late last year.

The forecast for net foreign direct investments, meanwhile, has been slashed to $1 billion from $2.6 billion, while the net hot money inflows projection has been reduced to $1.5 billion from $2.1 billion.

Tetangco said outward investments of Filipinos and expansion of domestic firms abroad are seen increasing, and therefore, offsetting FDI inflows to the country.

But the higher hot money outflows will be on the back of “bouts of volatility” in global financial markets, he said.

“What we’ve seen is the start of a reversal... the funds are going back. But the outflows we’ve seen in the early part of the year as well as the latter part of last year are still bigger than inflows we’ve seen in the last two or three months,” Tetangco said.

“I think now the markets have become more or less comfortable with what is happening in the global economy. There’s been relative calm in financial markets because of the assessment that there’s now less macroeconomic uncertainty globally and the advanced economies, particularly the US, are on the road to recovery so there’s improving market sentiment,” he continued.