MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) is set to revise the country’s external payments position assumptions to take into consideration the positive outlook on the global economy.
BSP Deputy Governor Diwa Gunigundo said authorities are reviewing this year’s projections for the balance of payments (BOP) position, gross international reserves (GIR), current account, foreign direct investments, foreign portfolio investments, among others.
“Actually we’re still updating our forecasts for 2017,” he said.
Guinigundo said the BSP expects a BOP surplus of $1 billion this year.
The BOP shows a summary of a country’s transactions with the rest of the world. Components include trade, foreign direct and portfolio investments, and even remittances from Filipinos abroad. A surplus means more money went into the economy while a deficit means otherwise.
The Philippines booked a BOP deficit of $420 million last year, a complete reversal of the $2.62 billion surplus recorded in 2015 due to uncertainties brought about by the normailization of interest rates in the US as well as he decision of the United Kingdom to leave the European Union (Brexit). The BSP expected a BOP surplus of $500 million or 0.2 percent of gross domestic product (GDP) last year. — Lawrence Agcaoili
Amid the uncertainries, FDIs yielded a record net inflow of $7.9 billion while foreign portfolio investments or hot money also booked a net inflow of $404.43 million last year
The central bank also expects the country current account (CA) position to book a surplus of $800 million.
Guinigundo said there is a need to recast BSP’s external payments position assumptions in light of the projected steady growth in the global economy.
The multilateral lender expects the global GDP growth to accelerate to 3.4 percent this year and to 3.6 percent in 2018 from 3.1 percent last year.
The current account is an important indicator about the economy’s health. It is the sum of the balance of trade in goods and services less imports as well as the net income from abroad and net current transfers.
The Philippines recorded a CA surplus of $601 million in 2016. This was 92 percent lower than the $7.3 billion surplus recorded in 2015 as well as the projected surplus of $2.5 billion for 2016.
However, Guinigundo noted the country’s export earnings jumped over 22 percent in January while cash remittances from Filipinos abroad grew 8.6 percent or more than double the full-year growth target of four percent.
“I think those are goods signs that the robustness of those two accounts will continue together with a good prospects in the global economy. People are also expecting some stability. We have upward bias in terms of oil prices and if that’s the case we should also expect steady or stable demand for our overseas Filipino workers, particularly in the Middle East,” he said.
On the other hand, he explained business process outsourcing (BPO) companies are not likely to pull out from the Philippines despite the new policies of US President Donald Trump.
“Based on anecdotal evidence they continue to come. Maybe it’s the expansion that is in question, that’s where the uncertainty is. I don’t think they will pull out, but they will remain. After all there are very few options or alternatives to the Philippines as a hub for BPOs,” he said.
The BSP conducts a biannual review of the BOP targets to update the numbers with recent developments here and abroad.