BoP forecasts revised
Economic activity seen subdued this year, improve slightly in 2024
BY NIÑA MYKA PAULINE ARCEO
The Manila Times
MONETARY authorities have approved new balance of payments (BoP) projections for this year and next based on latest data and emerging developments, the Bangko Sentral ng Pilipinas (BSP) announced on Friday. “The emerging BoP forecasts for 2023 and 2024 are underpinned by expectations of subdued global and domestic economic activity this year followed by slightly improved activity by next year,” the central bank said in a statement. The deficit outlook for 2023 was trimmed to $1.6 billion from $5.4 billion previously while that for 2024 was set at $500 million. The central bank qualified that these forecasts had limitations, especially given the continued buildup of external challenges. Stubborn inflation and the impact of the Russia-Ukraine war, among others — factors highlighted in December’s BoP projection exercise — are expected to continue weighing down global growth prospects, “albeit with lesser adverse impact relative to previous estimates.” Resilient demand has led to slightly better growth forecasts for major trading partners such as the United States and the eurozone, the BSP noted, while locally inflation and a spending slowdown are likely to dampen economic activity. Business and consumer sentiment are expected to be supported by monetary policy actions but overall “the external outlook for the next two years is likely to remain subdued.” This year’s “modest” gains, the BSP said, are mainly due to betterthan-expected data with regard to foreign direct investments, business process outsourcing and travel-related accounts. Sustained remittance inflows also support the latest outlook. China’s reopening, meanwhile, could revitalize demand for Philippine goods and services, and soften the impact of reduced global demand for exports. The launch of the 2023-2028 Philippine Development Plan and the ratification of the Regional Comprehensive Economic Partnership could bolster trade and investments, and lower global fuel prices are “also another key consideration coming into play in this forecast round,” the BSP said. Downside risks remain, however, particularly from continued monetary policy tightening. Renewed concerns over the state of the global banking sector could also contribute to volatility and dampen demand. For 2023, growth forecasts for merchandise imports and exports were maintained at 4.0 percent and 3.0 percent, respectively, while those for services imports and exports were raised to 11 percent and 17 percent from 8.0 percent and 15 percent. Outsourcing revenues were projected to grow by 9.0 percent instead of 5.0 percent, and travel receipts are expected to grow at a slower 80 percent from 150 percent previously. Cash remittances, meanwhile, were forecast to expand by 3.0 percent, down from the December outlook of 4.0 percent, but gross international reserves will likely hit a higher $100 billion instead of just $93 billion. As for 2024, the overall BoP position was forecast to stay in deficit, albeit smaller than previously projected, “consistent with the normalization of global and domestic economic activity.” Electronics and mineral products are expected to continue driving exports in 2024, and in the medium term as global growth picks up. Merchandise imports, meanwhile, will be supported by investments and production capacity improvements. High-value services exports are also expected to post a strong rebound. The downside risks to the outlook, the BSP said, are weaker global growth, a potential stalling of China’s economic recovery, escalation of the Ukraine-Russia war and increased financial market volatility. The growth forecasts for the year are 6.0 percent and 8.0 percent, respectively, for goods exports and imports; 16.0 percent and 10.0 percent for services exports and imports; 9.0 percent for outsourcing revenues; and 50 percent for travel receipts. Remittance growth is expected to stay steady at 3.0 percent while GIR (gross international reserve) was forecast to hit $102 billion. The Philippines ended 2022 with a BoP deficit of $7.3 billion, reversing from the previous year’s $1.3-billion surplus.