BSP sees higher budget surplus for this year

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) anticipates a further improvement in the country’s external payments position this year, attributing it to stronger inflows that would result in a higher balance of payments (BOP) surplus and a reduced current account (CA) shortfall.

Sittie Hannisha Butocan, director at the BSP’s Department of Economic Research, said the Philippines is expected to post a higher BOP surplus of $1.1 billion or 0.2 percent of gross domestic product (GDP), reversing last year’s deficit of $7.3 billion or 1.8 percent of GDP.

The BOP is the difference in total values between payments into and out of the country over a period.

A surplus indicates that more dollars flowed into the country from exports, remittances from overseas Filipino workers (OFWs), business process outsourcing (BPO) earnings, and tourism receipts than what flowed out to pay for the importation of goods, services, and capital.

“For 2023, the overall BOP is seen to settle to a surplus position as the latest CA forecast remains broadly unchanged while the financial account has been revised upward. The latter is reflective of the actual trend seen in the first nine months, particularly for the other investments account, underpinned by inflows from foreign loan availments that are partly in line with the government’s foreign borrowing plans,” Butocan said.

Latest data showed that the country’s BOP surplus stood at $3.2 billion form January to October, reversing the $7.12 billion deficit recorded in the same period last year.

Butocan said the BSP also now expects the country’s CA shortfall to narrow to $11.2 billion or 2.5 percent of GDP from $18.1 billion or 4.5 percent last year.

Butocan said monetary authorities still expect goods exports to contract by four percent and goods imports to decline by four percent this year.

Likewise, the central bank sees services exports jumping by 19 percent and services imports rising by nine percent this year.

“While the overall BOP is projected to register a surplus, the CA is expected to remain in deficit, driven by the persistent trade-in-goods gap despite the recent contraction in goods imports due mainly to easing global commodity prices. Goods exports are seen to register a decline in 2023, unchanged from the previous projection, amid the slowdown in external demand.

For 2023, Butocan said the BSP expects travel receipts to grow by 110 percent while the projected increase in business process outsourcing (BPO) revenues has been revised to a slower pace of eight percent from the initial estimate of nine percent.

The BSP also expects a lower hot money net inflow of $1 billion instead of the previously projected $2 billion. Meanwhile, the target for foreign direct investment inflow remains unchanged at $8 billion.

For 2024, Butocan said the BSP has lowered its BOP surplus projection to $400 million or 0.1 percent of GDP from $1 billion or 0.2 percent of GDP, while its CA deficit target improved to $9.5 billion or two percent of GDP from $10.3 billion or 2.1 percent of GDP.

“Key downside risks to the country’s external position continue to come from subdued global demand conditions, weak trade and investment prospects, lingering high interest rate environment, elevated inflation, and the escalation of geopolitical tensions in various parts of the world,” she said..

On the domestic front, Butocan said a weaker-than-target GDP outturn and higher-for-longer interest rate environment are among the key factors that could weigh on the country’s external outlook over the near term.

Meanwhile, Butocan said that positive reinforcements to the country’s external sector include the rebound in the global tech cycle, supporting the recovery of electronics exports.