BOP seen reversing into deficit this year

MANILA, Philippines - The balance of payments position is expected to settle in the deficit position this year from a previous forecast of a surplus, Bangko Sentral ng Pilipinas Governor Armando H. Tetangco Jr. said.

 “The dominant factors affecting the BOP are external in nature, specifically the normalization of policy in the US which has affected financial markets especially since there was a reallocation of assets… affecting the Philippines and other emerging markets,” Tetangco said.

A BOP deficit of $3.4 billion is now expected by yearend, a reversal of the $1.1-billion surplus projection announced in July. The latest figure was also a reversal of the $5.1-billion surplus recorded in last year.

Latest BSP data showed the country’s BOP position remained in a $3.43 billion deficit as of September.

“But the projected deficit is not expected to cause further decline to the reserves,” Tetangco said.

The country’s gross international reserves are expected to settle at around $79 billion to $80 billion by year end, lower than the earlier forecast of $85.3 billion. Foreign exchange reserves amounted to $79.3 billion as of October this year.

Despite a BOP deficit, the current account is expected to remain in surplus this year, an indication that the economy remains healthy.

Tetangco said the BSP even hiked its projection for the current account surplus to $6.6 billion by year end from the previous forecast of $6 billion on a smaller trade deficit due to increasing imports.

The BOP position is expected to return to a surplus next year, Tetangco said, with the forecast at $1 billion. The current account component of the BOP, meanwhile, is expected to amount to $6.8 billion next year.